Knopik v. Shelby Invs., LLC
| Decision Date | 17 March 2020 |
| Docket Number | No. SC 97985,SC 97985 |
| Citation | 597 S.W.3d 189 |
| Parties | Samuel S. KNOPIK, Appellant, v. SHELBY INVESTMENTS, LLC, Respondent. |
| Court | Missouri Supreme Court |
Knopik was represented by Michael W. Blanton of Gerash Steiner PC in Evergreen, Colorado, (720) 542-9336.
Shelby Investments was represented by Kevin D. Stanley and Buford L. Farrington of Humphrey, Farrington & McClain PC in Independence, (816) 836-5050.
After a beneficiary stopped receiving distributions from a trust of which he was the sole beneficiary, he filed suit against the trustee for breach of trust and removal of the trustee. The trustee filed a counterclaim for a judgment declaring that the beneficiary’s petition violated the no-contest clause in the trust instrument and, as a result, revoked and cancelled all trust provisions in the beneficiary’s favor. The circuit court sustained the trustee’s motion for summary judgment on its counterclaim. The beneficiary appeals, asserting the no-contest clause is unenforceable. The circuit court did not err in entering summary judgment in favor of the trustee on its declaratory judgment claim because the beneficiary did not seek relief from the no-contest clause pursuant to section 456.4-420,1 in which he could have challenged the enforceability and applicability of the no-contest clause to his claims. The beneficiary, instead, filed a petition asserting the exact claims the settlor unambiguously stated would forfeit the beneficiary’s interest in the trust. The judgment is affirmed.2
Gift L.L.C. ("Settlor") created the Knopik Irrevocable Trust ("Trust") in late December 2016. The provisions of the Trust established Shelby Investments, L.L.C. ("Trustee") as the sole trustee and Samuel Knopik ("Beneficiary") as the sole beneficiary of the Trust. The Trust was to provide the Beneficiary with a $100-per-month distribution, beginning in December 2016 and ending in December 2020. Provision 12 of the Trust, denominated "No Contest," provided:
In case any beneficiary shall (i) contest the validity of this trust, or any provisions hereof, in whole or in part; (ii) make a claim against a trustee for maladministration or breach of trust; or (iii) attempt to remove a trustee for any reason, with or without cause; then such contest or claim and such attempt shall cancel and terminate all provisions for or in favor of the beneficiary making or inciting such contest or claim, without regard to whether such contest or claim shall succeed or not; and all and any provisions or provision herein in favor of the beneficiary so making such contest or claim, or attempting or inciting the same, to be revoked and of no force and effect; and the entire trust estate shall revert to the Settlor and be distributed to the Settlor.
The Trustee made a single distribution to the Beneficiary in February 2017 but made no further distributions pursuant to the terms of the Trust. In August 2017, the Beneficiary filed a petition against the Trustee for breach of trust and to remove the Trustee. The Trustee admitted it made the single payment pursuant to the Trust, despite additional distributions being required. The Trustee further admitted it had indicated to the Beneficiary that it did not intend to make any future payments pursuant to the Trust. The Trustee also raised a counterclaim for declaratory judgment, asking the circuit court to determine that, due to the violation of the "No Contest" provision of the Trust, all provisions of the Trust in favor of the Beneficiary were cancelled and terminated. The Beneficiary and the Trustee each filed motions for summary judgment. The circuit court entered summary judgment in favor of the Trustee on its counterclaim after finding that the Beneficiary’s filing of his petition for breach of trust and removal violated the Trust’s no-contest clause. The Beneficiary appeals.
Appellate review of summary judgment is de novo. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp. , 854 S.W.2d 371, 376 (Mo. banc 1993). When disputed issues of material fact are not in issue, as is the case here, whether summary judgment was proper is exclusively an issue of law. Farish v. Mo. Dep't of Corr. , 416 S.W.3d 793, 795 (Mo. banc 2013).
There is no dispute as to the facts in this case. Only one question of law is presented: is the no-contest clause in the trust document enforceable? The Beneficiary asks this Court for relief by making one or both of the following holdings: (1) that no-contest clauses do not apply to actions for breach of trust and/or removal of a trustee; (2) that no-contest clauses are subject to a good faith/probable cause exception. Under the facts of this case, this Court declines to make either holding.
A no-contest clause in a trust serves a dual purpose: it permits the settlor to dispose of his own property as he sees fit, and it forces "the grave consequence of a forfeiture upon the beneficiary who attempt[s] to frustrate the intention of the donor as expressed in the disposing instrument." Cox v. Fisher , 322 S.W.2d 910, 913 (Mo. 1959). This Court has long held valid and enforceable provisions in wills and trusts instructing that a contest to the validity of the instrument will result in forfeiture. See, e.g. , id. ; Commerce Tr. Co. v. Weed , 318 S.W.2d 289, 299 (Mo. 1958) ; Rossi v. Davis , 345 Mo. 362, 133 S.W.2d 363, 372 (Mo. 1939) ; In re Chambers’ Estate , 322 Mo. 1086, 18 S.W.2d 30, 37 (Mo. banc 1929). Resolving the issue of whether a beneficiary has violated a forfeiture provision of a trust depends on the facts of the case and the language of the forfeiture provision. Cox , 322 S.W.2d at 914. The basic principle is that "a no-contest or forfeiture provision is to be enforced where it is clear that the [settlor] intended that the conduct in question should forfeit a beneficiary’s interest under the [trust]." Id.
The Beneficiary notes prior Missouri cases addressed the enforceability of no-contest clauses that prohibited challenges to the validity of the instrument. In other words, the Beneficiary asserts that because the no-contest clauses in Cox and Commerce Trust were limited to prohibiting the conduct set forth in subsection (i) of the no-contest clause – challenges to the validity of the trust – the reasoning of those cases does not apply to the enforceability of clauses prohibiting the type of conduct asserted in subsections (ii) – maladministration or breach of trust – or (iii) – removal of the trustee – of the no-contest clause in this case.
The Beneficiary is correct that the prior cases addressed trust validity. The Trustee is also correct that the principles invoked in reaching those prior decisions are broad and potentially applicable to claims for breach of trust and removal of a trustee. But regardless, the prior cases indicate that, because a settlor is free to dispose of his property as he wishes, the settlor has the power to determine what type of conduct by a beneficiary will forfeit the beneficiary’s interest in the instrument. As explained in Commerce Trust :
[The court’s] task is to ascertain and give effect to the [settlor’s] intention in regard to the provision in question. We recognize that a forfeiture clause is to be strictly construed, but we should not place a strained or overtechnical construction upon the language used in order to enable a beneficiary to take under the [trust] and thus ignore the condition imposed and accordingly refuse to give effect to the intent of the [settlor].
318 S.W.2d at 302. When a settlor explicitly and unambiguously describes the type of conduct by a beneficiary that will cause forfeiture, the settlor’s clear intent cannot be overlooked.
There is no doubt that the language of the Trust indicated the Settlor’s clear intent to impose the result of forfeiture when the Beneficiary filed his petition. Provision 12 of the Trust purported to require forfeiture if the Beneficiary were to contest the validity of the Trust, make a claim against the Trustee for maladministration or breach of trust, or attempt to remove the Trustee for any reason. The petition the Beneficiary filed in the circuit court contained two counts. Count I was titled "Breach of Trust." Count II – "Removal" – sought removal of the Trustee and proposed a replacement trustee. When the Beneficiary filed his petition, violation of the plain language of Provision 12 was evident. The circuit court found the filing of the petition, as pleaded, to be in violation of the Trust’s no-contest provision, and the circuit court ordered that all provisions of the Trust in favor of the Beneficiary be cancelled and terminated. The Beneficiary asks for relief by having this Court rule that no-contest clauses are inapplicable when the action is for breach of trust or removal of a trustee.
However, if the Beneficiary wished to challenge the enforceability and applicability of the no-contest clause to the claims in his petition, he should have done so in a proceeding under section 456.4-420. Section 456.4-420, enacted by the Missouri legislature in 2014, addresses a procedure by which an interested person can seek to avoid the effect of no-contest clauses in trusts.3 The statute provides "for an interlocutory determination whether a particular ... petition ... by the interested person would trigger application of the no-contest clause or would otherwise trigger a forfeiture that is enforceable under applicable law and public policy." Section 456.4-420.1. Upon consideration of the language of the clause, the relationship of the clause to the trust instrument, and the facts of the petition, the circuit court makes a determination that "result[s] in the no-contest clause being enforceable to the extent of the court’s ruling." Section 456.4-420.4. This determination is subject to appeal. Section 456.4-420.3.
Section 456.4-420 provided a "safe harbor" in which the Beneficiary should have invoked a challenge to the enforceability...
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