4FIDUCIARY LITIGATION

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Vol. 65, No. 3 Winter 2019

Trying an UndUe inflUence case By Tina n. BaBel

Playing WiTh a fUll “dec”: JUsTiciaBiliTy in declaraTory acTions By J. rixey rUffin and clayTon g. KUhn

TrUsTee removal Under secTion 706 of The mUTcBy chrisToPher m. Blaesing and andreW m. Bleyer

asseT ProTecTion Planning and crediTors’ claims: general PoWers of aPPoinTmenT and crediTor claims Under The missoUri Uniform PoWers of aPPoinTmenT acTBy PaTricK T. conner and Jared l. dodd

avoiding fighTs over no-conTesT claUses in missoUriBy James f. monafo and roBerT J. hUrTT, Jr.26

26 THE ST. LOUIS BAR JOURNAL/ WINTER 2019

Avoiding Fights over No-Contest Clauses in Missouri

By James F. Monafo and Robert J. Hurtt, Jr.

“Above all, I wish to have no fighting or bickering between the four of you . . . .”1

This wish, which comes from a let-ter a grantor wrote to his children and stepchildren, embodies a common desire of many individuals engaged in estate planning. Not surprisingly, the wish was not granted in this case; instead, the children and stepchildren proceeded with intense litigation regarding the trust documents that spanned five years and went all the way to the Missouri Supreme Court.2

It is this stated desire – that indi-viduals be allowed to truly rest in peace knowing family and other loved ones will abide by their testa-mentary wishes – that spawned the creation of no-contest or in terrorem clauses. Cooke v. Turner, a mid-19th century case from England, is com-monly credited as the original case upholding a provision in a will that called for a beneficiary who contest-ed the will’s validity to forfeit his or her share.3 The first reported Mis-souri decision came in 1929, when the Missouri Supreme Court held it was not a due process violation for a court to uphold such a provision.4 Numerous cases since then have af-firmed what one decision referred to as the “individual donor’s right to visit the grave consequence of a forfeiture upon the beneficiary who attempted to frustrate the intention of the donor as expressed in the dis-posing instrument.”5

Basics

No-contest clauses in wills or trusts generally provide that a person who challenges the testamentary docu-ments is to be treated under those documents as having predeceased the testator or grantor, and thus pre-vented from receiving a share.6 The

hope is that a potential challenger will find wisdom in the old maxim that “one in the hand is worth two in the bush.” Of course, to be effective, the challenger must actually have “one in the hand,” i.e., the potential contestant must be in line to receive some gift or bequest that would be forfeited if that person proceeds with a challenge. After all, if potential contestants already are set to receive nothing, there is nothing more to lose – beyond any fees they’ll pay their at-torneys to handle the lawsuit.

No-contest clauses are enforceable in nearly all states – only Florida and Indiana refuse to enforce them.7

Further, a number of states follow the Uniform Probate Code, which finds the clauses enforceable only if the contestant lacked probable cause to challenge the document.8 In this context, probable cause means “[t]he existence, at the time of the ini-tiation of the proceeding, of evidence which would lead a reasonable per-son, properly informed and advised, to conclude that there is a substantial likelihood that the contest or attack will be successful.”9 Other courts use different language for this con-cept, such as examining whether the action was brought in “good faith.”10 Regardless of how it is framed, the

Rob Hurtt is a commercial litigation attorney at Husch Blackwell with a focus in fiduciary and financial litigation. Rob litigates numerous forms of estate and trust controversies for both businesses and individuals. He has obtained a jury verdict for contestants in a three-week undue influence case, successfully de-fended trustees of a trust with more than $80 million in assets, defeated breach of fiduciary duty claims for a national banking client, and successfully handled numerous trustee removal actions for petitioners and respondents. Rob is a graduate of Saint Louis University School of Law.James F. Monafo has more than 25 years of experience representing business-es and individuals in complex business disputes, including class actions and mass actions. Jim is also a prominent member of the Firm’s Trust, Estate and Fiduciary Litigation team, and has significant experience representing corpo-rate and individual fiduciaries in controversies involving breach of fiduciary duty as well as other disputes relating to trusts and wills. He is a graduate of Saint Louis University School of Law.

1. Rouner v. Wise, 446 S.W.3d 242 (Mo. 2014).

2. Id.

3. See, e.g., Robert E. Kuelthau, Validity of No-Contest Clauses in Wills, 43 maRq. l. Rev. 528, 529 (1960).

4. In re Chambers’ Estate, 18 S.W.2d 30, 31 (Mo. 1929).

5. Cox v. Fisher, 322 S.W.2d 910, 913 (Mo. 1959).

6. See, e.g., Cox, supra note 5 at 912-13.

7. See Ind. Code §29-1-6-2 and §30-4-2.1-3; Fl. Stat. §732.517 and §736.1108.

8. See, e.g., Ariz. Rev. Stat. §14-2517; Colo. Rev. Stat. §15-11-517.

9. Restatement (second) of PRoPeRty: donative tRansfeRs §9.1 cmt. j (1983).

10. See, e.g., In re Estate of Andreasen, 2011 Ill. App. (1st) 101518-U, ¶ 31.

THE ST. LOUIS BAR JOURNAL/ WINTER 2019 27

28 THE ST. LOUIS BAR JOURNAL/ WINTER 2019

issue boils down to whether a public policy exception exists that would prevent enforcement.11

Missouri is among the minority of states that support the validity of no-contest provisions regardless of the existence of probable cause to chal-lenge the testamentary documents.12 As a result, one would expect Mis-souri to be one of the more favor-able jurisdictions in which to enforce these clauses.

Nevertheless, practitioners need to recognize that because the law disfavors forfeitures, the language of no-contest clauses is strictly con-strued, regardless of jurisdiction.13 The analysis begins with “a careful regard for the phrasing or language” of the clause,14 and courts engage in a fact-intensive review to determine the grantor’s intent regarding the provision.15 Thus, even Missouri courts enforce these clauses only when it is clear that the individual intended that the conduct in ques-tion should forfeit the contesting beneficiary’s interest.16

In a decision 60 years ago, the Mis-souri Supreme Court noted that ap-plying a strict construction did not require courts to “place a strained or overtechnical construction upon the language used in order to enable a beneficiary to take under the will and thus ignore the condition im-posed and accordingly refuse to give effect to the intent of the testator.”17 Over time, though, that admonition might have been lost. Nowadays, if there is any colorable dispute about enforcement, all bets are on the court not enforcing the provision.

Tobias v. Korman, a 2004 case, is the most recent published Missouri opinion affirming a forfeiture under a no-contest clause.18 Since that deci-sion, numerous other appellate deci-sions have come down the opposite way, either reversing a forfeiture or affirming the lower court’s refusal to enforce a no-contest provision.

Recent Missouri Cases

Rouner v. Wise involves a common scenario in trust and estate litiga-tion: a fight resulting from a remar-riage.19 There, the settlor’s stepchil-dren sought a declaration that they

were beneficiaries under the trust based on a handwritten letter the decedent prepared and signed.20 In the letter, decedent explained how he wished his property would be distributed upon his death – wishes that were contrary to his trust and to the stepchildren’s benefit.21 Notably, though, the letter was never deliv-ered to anyone; instead, it was found among the decedent’s papers after his death – and years after it was pre-pared.22 The court also noted that it was not located with the decedent’s trust documents.23

The stepchildren did not stop with seeking to be named beneficiaries; they also sought to enforce the trust’s no-contest clause against the settlor’s children from his first marriage.24 Their theory was that the children somehow violated the provision by denying the validity of the 2002 letter as a valid trust amendment.25

Since the court found the letter was not an amendment to the trust, it did not need to address the no-con-test issue, though it did still spend a few paragraphs commenting on it.26 The court noted that even if the

stepchildren has been successful in proving the 2002 letter was a trust amendment, the children’s actions of defending the trust did not clearly violate the no-contest clause.27 The takeaway for litigants: courts are un-likely to enforce a no-contest provi-sion against a party simply for de-fending a trust contest.

Winston v. Winston began from a similarly familiar fact pattern in trust litigation: a dispute between co-trust-ees.28 The individual co-trustee, Dr. Thomas Winston, brought suit against the corporate co-trustee, which then filed a third-party petition to approve its resignation as trustee.29 The ben-eficiaries, who were added as neces-sary parties in the third-party petition, then filed a counter-petition against Dr. Winston, alleging breach of fidu-ciary duty and seeking his removal as trustee and reformation of the trust.30

Dr. Winston argued that the bene-ficiaries – his own twin children – vi-olated the no-contest clause by filing their counter-petition and seeking affirmative relief.31 The court, how-ever, found none of the beneficia-

11. Id.

12. Commerce Trust Co. v. Weed, 318 S.W.2d 289 (Mo. 1958) (citing Chambers’ Estate, 18 S.W.2d at 230; Rossi v. Davis, 133 S.W.2d 363 (Mo. 1939)).

13. Chaney v. Cooper, 954 S.W.2d 510, 519 (Mo. Ct. App. 1997).

14. Cox, supra note 5 at 915.

15. Chaney, supra note 13 at 519.

16. Tobias v. Korman, 141 S.W.3d 468, 477 (Mo. Ct. App. 2004).

17. Commerce Trust, supra note 12 at 302.

18. Tobias v. Korman, 141 S.W.3d at 468 (Mo. Ct. App. 2004).

19. Rouner v. Wise, 446 S.W.3d 242, 244 (Mo. 2014).

20. Id. at 248.

21. Id. at 247.

22. Id. at 248.

23. Id.

24. Id.

25 . Id.

26. Id. at 260.

27. Id.

28. Winston v. Winston, 449 S.W.3d 1, 4 (Mo. Ct. App. 2014).

29. Id. at 5.

30. Id.

31. Id. at 6.

THE ST. LOUIS BAR JOURNAL/ WINTER 2019 29

ries’ actions “questioned the legal sufficiency of the trusts.”32 In fact, they implicitly acknowledged the validity of the trusts and the terms they sought to modify.33 Instead the beneficiaries argued that the modi-fications were necessary because of changed circumstances unforeseen by the settlor that frustrated his orig-inal intent – Dr. Winston’s estrange-ment from his children, who were six at the time of the settlor’s death.34

Another common result is to find the contestant’s actions did not chal-lenge the trust or its terms, but that they attempted to ensure the terms were properly effectuated. That is exactly what the court did in La-bantschnig v. Bohlman, where a ben-eficiary sued the trustee for breach of fiduciary duty and sought the trustee’s removal and an account-ing.35 After a bench trial, the court found more than a dozen breaches of fiduciary duty.36 It also specifically found the contestant’s action had not violated the trust’s no-contest provision on the basis that it was not a challenge but a validation of the trust terms.37 As the court noted, “We find no language in the in terro-rem clause indicating that enforcing one’s rights under the Trust would cause a forfeiture.”38

Can a party enforce a no-contest clause against the grantor? The court in Fay v. Grafton, addressed that situ-ation in a dispute involving a daugh-ter/beneficiary suing her father for paying principal to himself, which his trust documents allowed the trustee, i.e. him, the discretion to do.39 Be-yond that simple fact, the court found the idea of enforcing a no-contest clause to be illogical in such a situa-tion.40 In effect, how could a grantor be determined to predecease himself, the court wondered.41

The most recent published opin-ion involving no-contest clause en-forcement provided the rather unre-markable finding that in order for a no-contest provision to be valid, the underlying document must first be shown to be valid.42 In other words, a trial court cannot dismiss the con-test at the start based solely on the fact that plaintiff filed a contest in the face of a no-contest provision.

Safe Harbor

No-contest clauses are intended to provide a chilling effect on ben-eficiaries, who often stand to lose significantly if the clause is enforced against them. The result can be even more jarring when the individual

proceeded under the notion that the no-contest clause would not apply to their action.

To help address this issue, the Mis-souri legislature adopted a “safe har-bor” provision in 2014, which allows an interested person to file a verified petition with a court to receive an in-terlocutory determination of whether the proposed legal action would vio-late the clause in an irrevocable trust.43 The statute also lists seven specific in-stances where no-contest clauses will not be enforced as a matter of public policy, including filing a motion, peti-tion or other claim for relief objecting to jurisdiction, seeking approval of a nonjudicial settlement agreement, or concerning the appointment of a guardian or conservator.44

In the most recent legislative ses-sion, lawmakers considered an amendment to §456.4-420 that would have added two additional exemp-tions, regardless of the language in the clause or the settlor’s intent.45 HB 1650 sought to include filings concerning a trustee’s breach of trust and removal of a trustee among those actions statutorily excluded from no-contest clause enforcement.46 The bill made it out of the House, but concerns about the broadness of the language kept it from going far-ther.47 The Missouri Bar Fiduciary Litigation Committee has continued to discuss the proposal, and some version is expected to be considered by the legislature again in 2019.

Tips for Planners

• Ensure the clause is effective. Po-tential contestants should be identi-fied and left a small but worthwhile share. Also, pay attention to the language used, since disqualifying only the contestant generally means the person’s share simply goes to the individual’s children, which fre-quently is an acceptable result for the challenger. Instead, the clause needs to treat the contestant and any of the contestant’s heirs as pre-deceasing the grantor/testator.

• Toss out the boilerplate. Since courts strictly construe the provision’s lan-guage, be specific about what ac-tions are disqualifying. Obviously, doing so requires talking through

32. Id. at 7.

33. Id. at 8.

34. Id.

35. Labantschnig v. Bohlmann, 439 S.W.3d 269, 272 (Mo. Ct. App. 2014).

36. Id. at 272-73.

37. Id. at 275.

38. Id.

39. Fay v. Grafton, 484 S.W.3d 333, 338 (Mo. Ct. App. 2015).

40. Id. at 340.

41. Id.

42. Finkle-Rowlett Revocable Tr. Dated Aug. 28, 2009 v. Stiens, No. WD 81185, 2018 WL 3846239, at *4 (Mo. Ct. App., Aug. 14, 2018).

43. Mo. Rev. Stat. § 456.4-420 (2014).

44. Id.

45. H.B. No. 1650, 99th Leg., 2d Reg. Sess. (Mo. 2018).

46. Id.

47. Missouri House of Representatives, .

30 THE ST. LOUIS BAR JOURNAL/ WINTER 2019

the particulars with the client.

• In particularly problematic situa-tions where contests are expected, consider also preparing contracts not to contest between the anticipat-ed opposing parties. For one thing, preparing and sharing such con-tracts provide another way for the client to communicate with poten-tial beneficiaries about the client’s exact wishes. The language should be clear that the non-contracting parties are third-party beneficiaries, which should eliminate any argu-ment that they lack standing to en-force the agreement if the other side contests. Finally, since it is a con-tract, do not forget to include con-sideration, possibly pairing it with an inter vivos gift to be safe.

Tips for Litigators

• If representing contestants, never file a court action without know-ing whether a clause exists and what it says. If your clients are beneficiaries, they are entitled to the documents, so ask for them. If your client was excluded from the final documents, then enforcement of a no-contest clause against your

client should not be a problem, but you still will want to know the potential consequences, such as whether a contest by your cli-ent invalidates gifts to heirs who have received a share. Get creative about obtaining copies. Consider if it can be obtained through dis-covery in a related lawsuit, or find a sympathetic beneficiary through whom the request can be directed.

• Once you have the documents, have a copy of the no-contest clause lan-guage in front of you when drafting the claims. If it’s generic boiler-plate, you most likely should be OK to bring actions such as breach of fiduciary duty, discovery of assets, or trustee removal. Even a cleverly framed action to contest the docu-ment might escape enforcement in the right circumstances. Finally, if in doubt, utilize the safe harbor pro-vision and ask the court whether the planned action would be in con-travention of the clause.

• If representing potential defen-dants such as trustees, examine the viability of snuffing out claims be-fore litigation starts. Communicat-ing with sabre rattlers or identified

likely contestants regarding the no-contest clause just might lead them to reconsider filing suit. As part of this analysis, determine how much leverage the clause provides. You don’t need the clause to be enforced in order for it to help your defense. Even if opposing counsel knows forfeitures are disfavored and un-likely, is your opponent absolutely certain the clause won’t be enforced on your facts? And how much of that risk is the potential plaintiff willing to accept?

• Once an action has been filed, de-termine whether to counterclaim for enforcement of the clause or to simply include it among affirma-tive defenses and hold it back for litigating after resolving the origi-nal claim. While the former ap-proach likely would be the default, you still should consider whether issues about your case, such as the specific claims, jurisdiction, and judge, make it preferable to wait on seeking enforcement.

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