Samuel S. Knopik v. Shelby Investments, LLC

SUPREME COURT OF MISSOURI
en banc
SAMUEL S. KNOPIK, ) Opinion issued March 17, 2020
)
Appellant, )
)
v. ) No. SC97985
)
SHELBY INVESTMENTS, LLC, )
)
Respondent. )
APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY
The Honorable Mark A. Styles, Jr., Judge
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
Background
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.
1
All statutory references are to RSMo 2016, unless otherwise noted.
2
This Court transferred this case after an opinion by the Missouri Court of Appeals, Western
District. Mo. Const. art. V, sec. 10. Portions of the court of appeals’ opinion, authored by Judge
Lisa White Hardwick, are incorporated without further attribution.
2
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.
Standard of Review
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).
Analysis
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
3
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, 133
S.W.2d 363, 372 (Mo. 1939); In re Chambers’ Estate, 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
4
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
5
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
3
Under this statute, the term “no-contest clause” is defined as “a provision in a trust instrument
purporting to rescind a donative transfer to . . . any person, or that otherwise effects a forfeiture
of some or all of an interested person’s beneficial interest in a trust estate as a result of some
action taken by the beneficiary.” Section 456.4-420.6.
6
“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 and applicability of the no-contest clause to his
claims for breach of trust and removal. 4 But the Beneficiary chose to file his petition
asserting the exact claims the Trust unambiguously stated would result in forfeiture.
Because of the Beneficiary’s failure to utilize section 456.4-420, this Court need not
reach the issue of either delineating specific exceptions to the application of no-contest
clauses or deciding whether a good faith or probable cause exception should be
introduced in Missouri.
Courts cannot ignore the plain language of a no-contest clause. Here, the
Beneficiary ignored the means provided by section 456.4-420 for challenging the
enforceability and applicability of the no-contest clause to his claims. The circuit court
properly found the petition violated the Trust’s no-contest clause and did not err in
entering summary judgment in the Trustee’s favor on its declaratory judgment claim.
4
Under different facts, and if an interested person adheres to the safe harbor provision, a settlor’s
clear intent may balance against other concerns in a challenge to a no-contest clause.
7
Conclusion
The circuit court’s judgment is affirmed.
______________________________
Mary R. Russell, Judge
Draper, C.J., Powell, Breckenridge, Stith,
and Fischer, JJ., concur; Wilson, J., concurs
in separate opinion filed.
8
SUPREME COURT OF MISSOURI
en banc
SAMUEL S. KNOPIK, )
)
Appellant, )
)
v. ) No. SC97985
)
SHELBY INVESTMENTS, LLC, )
)
Respondent. )
CONCURRING OPINION
It is rare for a lawyer to build a career advising clients and litigating disputes
without thinking, at least once, “Wouldn’t it be great if we constructed a case that would
force the courts to decide this question of law?” Fortunately, lawyers usually resist the
temptation to pursue such an improper course. Usually, but not always.
For as long as there have been courts in the English common law tradition, one
can safely assume there have been attempts to manufacture disputes for the purpose of
manipulating those courts into giving advisory opinions about questions of law instead of
waiting for such questions to arise in the ordinary course and be resolved by litigation
between truly adverse parties. And, for as long as such attempts have been made, courts
have resisted them. More than a century ago, this Court stated:
The authority of this, as of every judicial tribunal, is limited to the
consideration of rights which are actually controverted. Unless some
individual right directly affecting the parties litigant is thus brought in
question, so that a judicial decision becomes necessary to settle the matter
in controversy between those relative thereto, the courts have no
jurisdiction; and it would be a perversion of the purposes for which they
were instituted, and an assumption of functions that do not belong to them,
to undertake to settle abstract questions of law, in whatever shape such
questions may be presented. The legislature, and not the judiciary,
promulgate laws for the future guidance of the people. Courts are called
upon to construe the law, and apply it to the particular facts in controversy
in actual controverted cases before them. Sham proceedings and colorable
disputes between parties actually friendly, to obtain the opinion of courts
upon questions of law, for their own interests, or for their future
guidance, have ever been condemned, and should never receive,
knowingly, their approval.
State ex rel. Hahn v. City of Westport, 36 S.W. 663, 667 (Mo. 1896) (emphasis added)
(citations omitted).
In Hahn, this Court quoted at length from Lord v. Veazie, 49 U.S. 251 (1850), in
which the United States Supreme Court held:
It is the office of courts of justice to decide the rights of persons and
property, when the persons in interest cannot adjust them by agreement
between themselves, and to do this upon the full hearing of both parties.
Any attempt, by a mere colorable dispute, to obtain the opinion of the court
upon a question of law, which a party desires to know for his own interest,
or his own purposes, when there is no real and substantial controversy
between those who appear as adverse parties to the suit, is an abuse which
courts of justice have always reprehened, and treated as a punishable
contempt of court.
Hahn, 36 S.W. at 667 (quoting Lord, 49 U.S. at 254-55).
Hahn also relied upon California v. San Pablo & T.R. Co., 149 U.S. 308 (1893), in
which the United States Supreme Court stated:
The duty of this court, as of every judicial tribunal, is limited to
determining rights of persons or of property which are actually controverted
2
in the particular case before it. When, it determining such rights, it becomes
necessary to give an opinion upon a question of law, that opinion may have
weight as a precedent for future decisions. But the court is not empowered
to decide moot questions or abstract propositions, or to declare, for the
government of future cases, principles or rules of law which cannot affect
the result as to the thing in issue in the case before it. No stipulation of
parties or counsel, whether in the case before the court or in any other case,
can enlarge the power, or affect the duty, of the court in this regard.
San Pablo & T.R. Co., 149 U.S. at 314.
This prohibition against fictitious or collusive suits has been summarized as
follows:
A “fictitious action” or “fictitious suit” may be defined as an action or suit
brought on pretense of a controversy when no such controversy in truth
exists. A “fictitious suit” also may be defined as a mere colorable dispute
to obtain the opinion of the court upon a question of law which a party
desires to know for his or her own interest or purposes, when there is no
real or substantial controversy between those who appear as adverse parties
to the suits.
A “collusive action” or “collusive suit” is one brought by seemingly
adverse parties under secret agreement and cooperation, with a view to
have some legal question decided which is not involved in a real
controversy between them. In accordance with the principle that the
function of a judicial tribunal is to hear and determine real controversies,
and the principle that court proceedings contemplate an adversary situation,
the object of every action should be to settle a real controversy existing
between the parties and involving adverse interests, and therefore an action
or suit cannot be maintained if it appears that it has not such an object, but
is fictitious or collusive.
An action cannot be maintained, as being fictitious or collusive, where its
real object is to procure an advisory opinion of the court, without an actual
contest. A court’s power extends only to the cases and controversies
brought before it. An action not founded upon an actual controversy
between the parties to it, and brought for the purpose of securing a
determination of a point of law, is collusive and will not be
entertained. Nor can an action be maintained to procure a judgment which
will affect or settle the rights or liabilities of third persons who are not
parties to the action.
3
An action will be precluded, as being fictitious or collusive, where its real
purpose is for one party to control both sides of the lawsuit so as to bring
about a predetermined, desired result, or to misuse the powers of the court
to delay action in another court.
1A C.J.S. Actions § 70 (2020) (footnotes omitted). See also Erwin Chemerinsky,
Federal Jurisdiction 48-49 (7th ed. 2016) (collecting cases for the proposition that
collusive suits are not justiciable); 17 Am. Jur. 2d Contempt § 60 (2020) (“An
attempt, by means of a mere colorable dispute, to obtain the opinion of the court
upon a question of law which a party desires to know for personal interests or
purposes, absent a real and substantial controversy between those who appear as
adverse parties to the suit, is an abuse punishable as a contempt of court.”)
(footnote omitted).
It has been suggested that the present case is fictitious or collusive. See Kimberly
E. Cohen, et al. Advanced Estate Planning Practice Update: Summer 2019 (American
Law Institute June 12, 2019) (quoted portion authored by Kathleen R. Sherby) (setting
forth the circumstances surrounding this case and concluding: “Based on the
circumstantial evidence gathered thus far, Knopik appears to be a ‘contrived’ case, put
together by the two disappointed lawyers in [a prior matter].”). The author of this
suggestion makes a compelling case but uses facts and inferences both within and outside
the record now before this Court. This Court, on the other hand, has authority to dismiss
an appeal on the ground that the case is fictitious or collusive only if the record before the
Court demonstrates this is so. State ex rel. Chandler v. McQuillin, 130 S.W. 9, 12 (Mo.
4
1910); Hahn, 36 S.W. at 665-66. Here, the record falls short of that standard, and the
Court declines to inquire of the parties and their counsel further on this issue.
It is devoutly to be hoped, however, that this case – and the ramifications and
remedies that will flow from the pursuit of a fictitious or collusive suit, though they were
not invoked here – come to mind the next time counsel or their clients consider feigning a
dispute (or the appearance of one) merely for the purpose of securing an advisory
opinion.
______________________________
Paul C. Wilson, Judge
5