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Court of Appeal:
Proviso of Trust That Interest in House Be Sold Only to Other Beneficiary Is Invalid
Opinion Says Statutory Prohibition on Unreasonable Restraints on Alienation Applies
By a MetNews Staff Writer
The Court of Appeal for this district has affirmed an order declaring invalid a decedent’s 2019 handwritten amendment to her 2018 restated revocable living trust, saying that the settlor was statutorily precluded from requiring that any of her three children, the sole beneficiaries, who wanted to sell a one-third interest in her house convey it only to a sibling and at a specified below-market price.
That “imposed an unreasonable restraint on alienation in violation of Civil Code section 711,” Justice Natalie P. Stone of Div. Seven said in an opinion, filed Wednesday, upholding a decision by Los Angeles Superior Court Judge Michael C. Small.
Sec. 711 provides:
“Conditions restraining alienation, when repugnant to the interest created, are void.”
The amendment drafted by the settlor, Silvia Villareal, says:
“With the intention of leaving my house to my kids (Sonia, Arturo, and Leticia) which I worked all my life for, my legacy & my wish, is to keep the house as a place for all three of my children to enjoy, live and prosper and not to be sold or given outside of…family.”
It goes on to specify that if one of the children “upon my death or in the future wish to sell their portion they must…offer it for 100,000 (one hundred thousand doll.) to each other.”
Two Offspring Petition
The settlor died on Nov. 17, 2020, and daughter Leticia Linzner became the successor trustee. Her siblings, Arturo Villareal and Sonia Godoy, filed a petition, which Linzner opposed, to declare the amendment invalid. The petitioning parties submitted evidence showing that the current value of the property was $1.3 million, so that each share was worth $433,333.33.
Linzner argued in her appeal from Small’s April 6, 2023 order in favor of Villareal and Godoy:
“None of the cases cited by Sonia and Arturo deal with a court finding that a restraint on alienation applies in a testamentary instrument. All of the cases cited by them are cases dealing with deeds, contracts and other business matters. The distinction in the cases cited by Sonia and Arturo is that restraints on alienation were found in contractual settings, but not in the case of a bequest under a trust.”
Contention Rejected
Stone agreed that “[t]here is relatively little California case law addressing the application of section 711 to testamentary instruments,” but said that such precedent “which does exist indicates the statute does apply,” citing to a passage in a 1906 California Supreme Court opinion and Court of Appeal opinions from 1951 and 1970.
After pointing to decisions from other judications and statements in treatises, she declared:
“We agree with Arturo and Sonia that the prohibition of restraints on alienation, as codified in section 711, applies regardless of the method in which a fee simple interest is conveyed, because a restraining condition is antithetical to the created fee simple interest and its inherent right of free alienation.”
Reasonableness of Restraint
Linzner recited that only unreasonable restraints on alienation are prohibited—a proposition with which Stone agreed—and argued that the restraint in question is reasonable because the amendment provides that the trust “be administered for the benefit of the family in accordance with Silvia’s wishes.”
With the latter proposition, Stone disagreed, saying:
“The trust instrument conveyed the Property in fee simple, which vested the siblings with the right to freely alienate their respective interests. But that right is sabotaged by the language in the 2019 amendment restricting any sale of the interests to $100,000 and only amongst the siblings.
“Even if those restrictions are not per se void, a weighing of the quantum of restraint and its justification counsels against their enforcement.”
Noting the present value of the property, the justice said “the siblings stood to lose hundreds of thousands of dollars if forced to limit a sale of their one-third interests to $100,000,” adding:
“The quantum of restraint is even greater considering a sale could be made in a market of only two possible purchasers. While Silvia meant for these restrictions to ensure the Property stayed in the family, that justification—even if legitimate and well-intentioned—does not overcome the heavy presumption in favor of alienability.”
The case is Godoy v. Linzner, B330725.
David A. Esquibias of Westlake Law Group in Westlake Village represented Linzner. Nathan M Talei of the Encino firm of Oldman, Cooley, Sallus, Birnberg & Coleman LLP was the lawyer on appeal for Villareal and Godoy.
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