McDill v. McDill (In re The Phyllis V. McDill Revocable Trust)

• Decision Date: 22 March 2022
• Docket Number: S-21-0113
• Parties: IN THE MATTER OF THE PHYLLIS V. McDILL REVOCABLE TRUST: v. MICHAEL G. McDILL, in his capacity as trustee of the Phyllis McDill Revocable Trust, Appellee (Petitioner). THOMAS P. McDILL, JR., Appellant (Respondent),
• Court: Wyoming Supreme Court

2022 WY 40

IN THE MATTER OF THE PHYLLIS V. McDILL REVOCABLE TRUST:

THOMAS P. McDILL, JR., Appellant (Respondent), v. MICHAEL G. McDILL, in his capacity as trustee of the Phyllis McDill Revocable Trust, Appellee (Petitioner).

No. S-21-0113

Supreme Court of Wyoming

March 22, 2022

Appeal from the District Court of Laramie County The Honorable Peter H. Froelicher, Judge.

Representing Appellant:

Bernard Q. Phelan, Cheyenne, Wyoming.

Representing Appellee:

Brianne K. Sherman and Kaylee A. Harmon of Long Reimer Winegar LLP, Cheyenne, Wyoming. Argument by Ms. Harmon.

Before FOX, C.J., and DAVIS ^[*] , KAUTZ, BOOMGAARDEN, and GRAY, JJ.

KAUTZ Justice.

[¶1] Michael G. McDill, as trustee of his deceased mother's trust, filed a Petition for Instructions asking the district court to confirm, inter alia, that his brother, Thomas P. McDill, Jr., was excluded as a beneficiary under the trust because he violated its no-contest provision. In response, Thomas asserted various counterclaims and requested Michael be removed as trustee.^[1] Michael eventually filed a motion for summary judgment on the Petition for Instructions and a motion to dismiss Thomas's counterclaims. Thomas, in turn, sought to amend his response to the Petition to clarify his counterclaims and to add affirmative defenses. The district court granted summary judgment to Michael, dismissed Thomas's counterclaims, and denied Thomas's motion to amend. We affirm.

ISSUES

[¶2] Thomas raises five issues which we re-state as three:

1. Did the district court err by granting summary judgment to Michael on his claim that Thomas was disinherited from taking under the trust because he violated its no-contest provision?

2. Did the district court err by dismissing Thomas's counterclaims for lack of standing and as barred by the applicable statute of limitations?

3. Did the district court abuse its discretion by denying Thomas's motion for leave to amend his response to the Petition for Instructions?

FACTS

[¶3] On April 22, 2009, Phyllis V. McDill created the "Phyllis V. McDill Revocable Trust." At that time she had three adult children-Thomas, Michael, and Teresa L. McDill-and six grandchildren. She named herself as trustee and Michael and Teresa as successor co-trustees. The trust directed that, upon Phyllis's death, her real property "be sold at the best available price . . . and the proceeds from such sale or sales be made part of the Trust Fund." It gave the trustee the authority to "sell any of [Phyllis]'s tangible personal property that the [t]rustee . . . determine[s] [she] would not wish to have preserved for [her] descendants and . . . add the proceeds of any such sale to the Trust Fund." Any tangible personal property not so sold was to be distributed "to [Phyllis]'s descendants who survive [her], per stirpes." The trust gave $100, 000 each to Thomas, Michael, and Teresa if they were living and, if not, to their surviving descendants, per stirpes. The remaining balance of the Trust Fund was to be divided equally among Phyllis's surviving grandchildren.

[¶4] Five years later, in May 2014, Phyllis amended the trust (first amendment) to name herself and Michael as co-trustees. In June 2016, Phyllis again amended the trust (second amendment). This time, she named herself, Michael, and Thomas as co-trustees, added a provision requiring an annual accounting, and amended the trust's real property provisions to give Thomas her house and property located on Moreland Avenue in Cheyenne after her death. Several months later, in September 2016, Phyllis executed a third amendment to the trust which revoked the second amendment and "adopt[ed], ratif[ied], and confirm[ed]" the original trust and first amendment thereto.

[¶5] On December 15, 2016, Phyllis amended the trust for the fourth and final time. The fourth amendment re-stated the terms of the original trust and first amendment and added a no-contest provision, which stated:

Effect of Attempted Contest. In the event that any person (1) directly or indirectly contests or attacks this [trust] or any trust or beneficial interest created hereunder . . . or (2) conspires with or voluntarily assists anyone associated with any such contest or attack, singly or in conjunction with any other person(s), then the Settlor specifically disinherits such person and such person's descendants; all interests and properties given to or created for the benefit of such person and such person's descendants, directly or in trust, under this [trust], shall be forfeited, and such property shall be disposed [of] as if such person and their descendants had predeceased the Settlor.

The trust outlined "the acts" constituting a "contest" for purposes of the no-contest provision. Those "acts" included a "[d]irect or [i]ndirect contest" in which a "person unsuccessfully contests or, in any manner, attacks or seeks to impair or invalidate any provision of [the trust] . . . on any grounds whatsoever." The trust also required the trustee to provide notice of his intent to enforce the no-contest provision and give the person contesting the trust an opportunity to dismiss or withdraw the contest to avoid disinheritance:

Withdrawal of Contest. Notwithstanding the

foregoing, the [no-contest] provision[] . . . shall not apply unless and until the [t]rustee has given written notice of such fiduciary's intent to enforce the foregoing provision[] against a particular person to such person . . . and give[s] such person the opportunity to voluntarily dismiss or withdraw any petition or action that such fiduciary deems to constitute a contest or to otherwise cooperate in defending or terminating a contest. If such person dismisses or withdraws such petition, contest or other claim or takes other actions requested by such fiduciary within thirty (30) business days after receipt of such notice, then th[e] [no-contest provision] shall not apply with respect to such petition or contest or other claim; provided that such fiduciary shall have the broadest permissible discretion in terms of insisting on a particular form or scope of dismissal or withdrawal in order to ensure that the petition, contest or other claim will not reoccur.

[¶6] On December 31, 2017, Phyllis died and the trust became irrevocable. On January 26, 2018, Michael, acting as the sole trustee, notified the trust's beneficiaries, including Thomas, that they had 120 days from receipt of the notice in which to "commence a judicial proceeding to contest the validity of the [t]rust" (hereinafter "statutory notice"). See Wyo. Stat. Ann. § 4-10-604(a)(ii) (LexisNexis 2021). The United States Postal Service (USPS) delivered the notice, with the trust attached, to Thomas's address in Austin, Texas, on February 2, 2018, giving him until June 4, 2018, to contest the trust's validity.

[¶7] On May 15, 2018, Thomas filed an "Original Petition and Action for Equitable Relief" in the District Court of the 459th Judicial District of Travis County, Texas (Texas Lawsuit) against Michael and various attorneys who represented Michael. He alleged the third and fourth amendments to the trust were invalid because Phyllis executed them under duress and was unduly influenced by Michael and the other defendants. In addition to requesting that the Texas court invalidate the third and fourth amendments, Thomas sought an order quieting title to the Moreland Avenue property in him and an order requiring Michael to make a full accounting of trust assets as required by the second amendment to the trust.

[¶8] Two months later, Michael sent Thomas notice of his intent to enforce the trust's no-contest provision and informed him he had 30 business days to voluntarily dismiss or withdraw the Texas Lawsuit with prejudice to avoid being disinherited. Thomas did not dismiss or withdraw the Texas Lawsuit. On February 14, 2019, the Texas district court dismissed the lawsuit against Michael and his attorneys who were not residents of Texas for lack of personal jurisdiction. With respect to the remaining defendants who were Texas residents, it dismissed the claims against them under Texas's attorney-immunity doctrine. The Texas Court of Appeals affirmed the dismissal. See McDill v. McDill, No. 03-19-00162-CV, 2020 WL 4726634, *1 (Tex. Ct. App. July 30, 2020).

[¶9] In the meantime, Michael, acting as trustee, filed a Petition for Instructions (Petition) with the Laramie County district court seeking confirmation that (1) Thomas's filing of the Texas Lawsuit triggered the no-contest provision; (2) Thomas had received notice of Michael's intent to enforce the trust's no-contest provision; and (3) Thomas was prohibited from taking under the trust because Thomas had failed to dismiss or otherwise withdraw the Texas Lawsuit. He also sought confirmation of his proposed distribution of the trust assets which called for Thomas to receive nothing and for he and Teresa to split the $100, 000 Thomas would have received had he not violated the no-contest provision.

[¶10] Thomas responded to the Petition asserting Michael had violated his fiduciary duties as trustee; the first, third and fourth amendments to the trust were the product of undue influence; and application of the no-contest provision was contingent on the outcome of the Texas Lawsuit. He subsequently filed an amended response requesting Michael be removed as trustee for breach of trust based on his violations of the duty of loyalty, Wyo. Stat. Ann. § 4-10-802 (LexisNexis 2021), and the duty to inform and report, Wyo. Stat. Ann. § 4-10-813 (LexisNexis 2021). He also faulted Michael for urging Phyllis to add language in the third and fourth amendments to the trust which disinherited Thomas, eliminated the accounting requirements of § 4-10-813, and relieved Michael of...