ANALYSIS OF APRIL 22, 2021 SUPREME COURT ORDER
(Posted April 22, 2021) There are no published opinions or orders from the Supreme Court today, but we do get an interesting unpub. On the likely chance that some of you will find it worthwhile, here’s a report.
McMurtrie v. McMurtrie comes to us from Chesterfield County. There, a settlor created a revocable trust. The declaration contained an in terrorem clause, stating that any beneficiary of the trust who sought to impair or invalidate it would thereby forfeit any interest in it. The declaration named three co-trustees, two of whom I infer are the settlor’s sons.
In 2019, the settlor asked the trustees to distribute the trust principal to him. Hey, he’s the only beneficiary, so he should be allowed to do that, right? But one of the three trustees balked, claiming that he, the co-trustee, had “absolute discretion as to distribution.”
The settlor then sued, asking for a declaratory judgment that the no-contest clause didn’t apply to him because, well, it was his trust. The trustees answered, and then the settlor sought summary judgment. He specifically requested a declaration that (1) the no-contest clause didn’t apply to him at all, or (2) if it did apply to him, it didn’t impair his ability to terminate the trust as allowed by statute, or to sue the trustees for breach of fiduciary duty.
The circuit court was obliging; it gave the settlor about as complete a victory as he could wish for. The court ruled that the clause didn’t apply to the settlor, and that the settlor could terminate the trust and sue for breach of fiduciary duty.
After a clobbering like that, the trustees were relieved to get a writ. Today, the Supreme Court reverses on the only appealed issue. It rules that under the plain language of the trust declaration, the no-contest clause does apply to the settlor, even though it’s his own trust, because he’s plainly a beneficiary. During his lifetime, he’s the beneficiary; the only others are contingent upon his death. The courts don’t get to rewrite unambiguous trust language.
This looks like a complete win for the trustees. Ah, but note the way I phrased that line above: The justices reverse on the only appealed issue. The trustees hadn’t appealed the findings that the settlor could terminate the trust and sue them for breach of duty.
Uh-oh. That means that the settlor has an easy way to get his way: He just files a petition under the statute to terminate the trust. That statute provides that the circuit court shall enter an order modifying the trust, and the circuit court here has already ruled, in an unappealed finding, that the settlor has the right to do that. Whether the settlor chooses to go ahead and sue for breach of fiduciary duty is up to him, though it might in theory be a way for him to recoup his attorney’s fees for this case and appeal.
This ruling is a second-cousin of the Manchester Oaks doctrine, which refers to a 2012 SCV decision. There, the Robes held that if a judgment rests upon two or more independent grounds, and the appellant appeals only one of those, the Supreme Court will summarily affirm on the unappealed ground. McMurtrie is a cousin and not an identical twin because the relief requested isn’t identical for the three claims. Today’s order gives the settlor an easy roadmap to a victory, despite his technical loss today.