Court Reverses Lower Court Decision That Settlement Agreement Between Trustee and Omitted Spouse Is Not Enforceable

A California Court of Appeals in the First Appellate Division reverses and remands a lower court’s decision that a settlement agreement between a trustee and omitted spouse became unenforceable after the sale of the trust’s primary asset fell through. This event did not negate the trustee’s agreement to pay the decedent’s spouse the balance of a settlement owed pursuant to a negotiated agreement. Rather, the sale is a condition precedent that must occur before the trust is obligated to pay the balance owed. Grays-Jones v. Spencer (In re Jones) (Cal. Ct. App., No. A162543, September 2, 2022).

Charles A. Jones established a trust in 1999 and named his daughter, Sandra Spencer, as successor trustee. In 2006, he married Helen Grays-Jones but did not amend his trust to include her. The trust’s largest asset was real property that was in the process of being sold when Mr. Jones died.

Upon his death, Mrs. Grays-Jones petitioned a trial court for an interest in his estate as an omitted spouse under California law. Ms. Spencer, as trustee, and Mrs. Grays-Jones entered into a settlement to pay Mrs. Grays-Jones a total of $3 million in satisfaction of her interest in the estate. Of the $3 million, $150,000 of this was paid upfront, with the balance to be paid upon completion of the sale. Three months later, the sale fell through, and Ms. Spencer did not pay the remaining amount to Mrs. Grays-Jones.

Mrs. Grays-Jones filed a petition with the trial court to enforce the settlement. Ms. Spencer opposed this petition. The trial court sided with Ms. Spencer, holding the settlement was unenforceable. It found there was no independent promise to pay the whole amount and that the sale of property was a condition precedent that never materialized. Mrs.Grays-Jones appealed.

The Court of Appeals reverses the trial court’s conclusion that the agreement could not be enforced because the sale of the property was a condition precedent to Ms. Spencer owing Mrs. Grays-Jones $3 million. The failed sale does not render the entire agreement unenforceable. The settlement agreement is comprised of two separate promises to pay. The settlement agreement also contains an unequivocal promise that the trust will pay Mrs. Grays-Jones $3 million. The unsuccessful sale does not void the entire agreement; rather, it solely affects when the trust must pay Mrs. Grays-Jones the balance of the settlement amount. The settlement agreement is still enforceable even if the time for paying the funds is not fixed in the agreement.

Read the full text of this decision.