A Minor’s Compromise: How a Minor Trust Beneficiary’s Rights Can Be Forever Impacted When a Guardian ad Litem Settles Litigation on the Minor’s Behalf
February 2023, Volume XXIV, Issue 7
From the February 2023 Issue of the Elder Law Report by Wolters Kluwer
Minors are commonly named as trust beneficiaries, especially when the trust settlor has children and grandchildren. If the trust settlor dies while any beneficiary is under the age of eighteen years, the Court usually appoints a Guardian ad Litem to represent the interests of the minor in Court proceedings involving the trust.[1] When a party to trust litigation is a minor, the minor’s Court-appointed Guardian ad Litem represents the minor’s interests in the action, negotiates at mediation, and signs any settlement agreement.
The procedure where a Guardian ad Litem settles a case on behalf of a minor is called a “minor’s compromise” and is codified in the state of California, for example, in California Code of Civil Procedure Section 372. A “minor’s compromise” empowers a Guardian ad Litem appearing on behalf of a minor to compromise the minor’s claims by executing a settlement agreement, which becomes a binding settlement agreement if it is approved by the Court.[2] The Court will approve the settlement agreement entered into by the Guardian ad Litem if the Court finds that the settlement terms are in the minor’s best interests.[3]
The California Court of Appeal case Chui v. Chui (2022) 75 Cal.App.5th 873 (Mar. 3, 2022, B306918) (Chui I) illustrates how a minor trust beneficiary’s rights can be significantly impacted when a Guardian ad Litem settles the litigation on the minor’s behalf, even when the minor objects to the settlement terms. The Chui case recently came back to the Court of Appeal in Chui v. Chui (2022) 86 Cal.App.5th 929 (Nov. 30, 2022, B308574) (Chui II) and holds that a Guardian ad Litem’s authority ends once the minor turns eighteen years old. However, a beneficiary remains forever powerless, even upon turning eighteen, from disaffirming the settlement agreement entered into by the Guardian ad Litem when the beneficiary was a minor.
Chui I
Jacqueline and Michael Chui were minor trust beneficiaries of a sizable trust that was involved in protracted litigation. The Los Angeles County Superior Court appointed a Guardian ad Litem, Jackson Chen (the GAL), for Jacqueline and Michael. On the first day of trial, the parties settled the litigation and set forth the terms of the settlement agreement on the record. Jacqueline and Michael were unable to participate in settlement negotiations because they were represented by the GAL. The settlement terms affected Jacqueline and Michael’s beneficial interests in the trust and the protracted litigation. The terms were memorialized in writing and the GAL signed the settlement agreement on behalf of Jacqueline and Michael. Pursuant to the “minor’s compromise” procedure, the GAL filed a petition for approval of the settlement agreement. Jacqueline and Michael, who were 17 and 15 years old at the time, did not agree with the settlement agreement’s terms and each filed declarations to repudiate the settlement agreement. Despite Jacqueline and Michael’s objections to the proposed settlement, the Court granted the GAL’s petition for approval of the settlement agreement.
Jacqueline and Michael filed motions to set aside the settlement, which the Court promptly rejected. Jacqueline and Michael appealed the Court’s Order approving the GAL’s petition for approval of the settlement agreement (the Chui I appeal).
In Chui I, the Second District of the California Courts of Appeal affirmed the Los Angeles County Superior Court’s decision in full. The Chui I Court held that despite Jacqueline and Michael’s objections to the settlement terms and attempted repudiation of the settlement agreement, the trial court properly approved the settlement agreement entered into by the GAL. The Chui I Court determined that the minor’s compromise procedure of California Code of Civil Procedure Section 372(a)(1) is an exception to the common law rule[4] allowing minors to disaffirm contracts.[5] The Chui I Court reasoned that since California Code of Civil Procedure section 372(a)(1) “authorizes a [Guardian ad Litem] to make settlement agreements in judicial proceedings subject only to the approval of the Court[,]” allowing a minor to disaffirm a contract negotiated by the Guardian ad Litem would “negate this authority[.]”[6]
Notably, Code of Civil Procedure Section 372 does not contain language expressly disallowing a minor to disaffirm a Guardian ad Litem’s settlement agreement, nor language indicating any legislative policy of encouraging minors to be eternally bound by settlement agreements that they did not consent to. To the contrary, Code of Civil Procedure Sections 372(b) and (c) allow a minor who is twelve years of age or older to appear in Court without a Guardian ad Litem in certain proceedings (which do not include a trust proceeding).[7]
It is well-settled that the statutes regarding the appointment of a Guardian ad Litem were enacted to protect minors and insane and incompetent persons, not to preclude them from their legal rights.[8] However, a Guardian ad Litem negotiating and entering into a settlement agreement on behalf of a minor despite the minor’s objection has the very effect of precluding minors from their rights. Notably, the law allows a minor to disaffirm a deed,[9] a deed of trust,[10] a contract for a minor’s personal services,[11] a promissory note,[12] and a minor’s contract for the purchase of real property.[13] However, when it comes to a settlement agreement that substantially alters a near-adult child’s vested beneficial interests in a trust, Chui I held that a minor beneficiary has “no legal authority to file repudiations without the representation of a Guardian ad Litem,” causing any objection filed by a near-adult child to be considered “ineffective and improper.”[14]
Chui I dramatically expanded Code of Civil Procedure Section 732(a)(1) to disallow a minor’s repudiation or disaffirmance of a settlement agreement. By denying Jacqueline and Michael the ability to disaffirm the settlement agreement that altered their vested interests in the trust, Jacqueline and Michael became permanently bound by the terms of the agreement entered into on their behalf—and despite their objections—by their Guardian ad Litem.
Chui II
Jacqueline and Michael, who were then 17 and 16 years old, subsequently hired independent counsel and each filed petitions to remove the GAL. Shortly thereafter, Jacqueline turned 18 years old. The GAL filed motions to disqualify Jacqueline and Michael’s purported counsel, asserting that Jacqueline and Michael could only appear in the action through the GAL. The Los Angeles County Superior Court granted the GAL’s motions to disqualify the independent counsel and struck Jacqueline and Michael’s petitions to remove the GAL. The trial court held, “[U]nder [Code of Civil Procedure section] 372, minors can only appear through the Guardian ad Litem[,]” who “has exclusive authority to act for the minors in this litigation[.]”[15]
The Superior Court further held that despite Jacqueline no longer being a minor, the GAL “remains in place and he is to continue to serve in that capacity until discharged by the Court.”[16] Jacqueline and Michael swiftly appealed the Court’s order (the Chui II appeal). On May 22, 2022, Michael turned 18 years old. The Chui II Court overturned the trial court’s order striking the petitions to remove the GAL, reasoning that the GAL’s appointment had to be terminated because Jacqueline and Michael were now adults, and there were no other grounds for continuing the GAL’s appointment (i.e., a disability). “[B]ecause Jacqueline and Michael are no longer minors, there is no discretion to exercise with respect to whether [the GAL] Chen’s appointment can continue; the law requires the termination of his appointment.”[17]
While Chui II terminated the GAL’s appointment and allowed Jacqueline and Michael, now adults, to begin appearing in the action without the GAL, Chui II did not impact the settlement entered into by the GAL that was approved by the Superior Court and upheld on appeal in Chui I.
The Detrimental Impact on a Minor Trust Beneficiary’s Rights
Chui I created an enormous legal barrier for minors. Children who lose their parents or grandparents can have any potential inheritance drastically altered via a settlement agreement that they had no part in, and they have no recourse to repudiate or disaffirm such agreement, even upon turning eighteen years old. Chui II established that a minor who reaches the age of majority and becomes capable of making informed decisions has the right to seek removal of a Court-appointed Guardian ad Litem. This ability to remove a Guardian ad Litem, however, does not provide any recourse if the Court has already approved a settlement agreement entered into by the Guardian ad Litem on the trust beneficiary’s behalf. Notably, far more trust cases are being mediated and resolved through settlement agreements since the recent seminal case Breslin v. Breslin (2021) 62 Cal.App.5th 801.
The Breslin Court held that a California probate judge may order parties of trust disputes to private mediation, and then disallow the objections of any nonparticipating parties to a settlement agreement reached in the ordered mediation.[18] Therefore, it is anticipated that petitions to approve settlement agreements negotiated and entered into by a Guardian ad Litem on a minor trust beneficiary’s behalf will become more prevalent in California Superior Courts. Near-adult children who inherit from loved ones will now be eternally bound by the terms of a Court-approved settlement agreement negotiated and entered into by a Guardian ad litem.
[1] California Probate Code § 1003(a)(1); California Code of Civil Procedure (“CCP”) § 372; County of Los Angeles v. Superior Court (2001) 91 Cal.App.4th 1303.
[2] CCP § 372(a)(1).
[3] Chui v. Chui (2022) 75 Cal.App.5th 873, 875 (“Chui I”).
[4] The common law rule allowing minors to disaffirm contracts is codified in California Family Code §§ 6700 and 6710.
[5] Chui I, supra at 873, 901.
[6] Chui I, supra at 873, 903.
[7] CCP § 372(b)-(c).
[8] Briggs v. Briggs (1958) 160 Cal.App.2d 312, 314.
[9] Sparks v. Sparks (1950) 101 Cal.App.2d 129, 137.
[10] Lee v. Hibernia Savings & Loan Society (1918) 177 Cal. 656, 659.
[11] Berg v. Taylor (2007) 148 Cal.App.4th 809, 817.
[12] Niemann v. Deverich (1950) 98 Cal.App.2d 787, 793.
[13] Maier v. Harbor Center Land Co. (1919) 41 Cal.App. 79, 80−81.
[14] Chui I, supra at 873, 893
[15] Chui v. Chui (2022) 86 Cal.App.5th 929, 933 (“Chui II”).
[16] Id. at 935.
[17] Chui II, supra at 938.
[18] Breslin v. Breslin (2021) 62 Cal.App.5th 801.