Squabbles over inheritances have been the grist for some of the most divisive family feuds imaginable. In hopes of forestalling such estrangements, a growing number of patriarchs and matriarchs have been inserting into their wills “no contest” clauses which dictate that any beneficiary who files a lawsuit challenging any part of the bequest automatically forfeits their interest in it.
But such efforts are often less successful at preventing battles than simply giving the heirs something different to fight about, as was the case in a dispute before the South Carolina Court of Appeals where the court ruled on Oct. 30 that a trust beneficiary’s decision to file a complaint with the state’s Office of Disciplinary Counsel against the trustees’ lawyer didn’t trigger a non-contest clause included in the trust.
Before Eleanor Lenahan passed away in 2012 she created a revocable trust, naming her children as beneficiaries and two of her daughters, Kathleen Heslin and Maureen Mosley, as trustees. It contained a no-contest clause disinheriting any beneficiary who “objects in any manner to any action taken or proposed to be taken in good faith by the Trustee.”
Nevertheless, two of Lenahan’s other daughters, Mary Lenahan and Jean Qualliu, began objecting to their sisters’ actions in administering the trust, ultimately driving the siblings to sign a settlement agreement. Soon after, Lenahan and Qualliu sent letters of complaint to the ODC accusing their sisters’ lawyer of misconduct. The trustee sisters sought a declaratory judgment, alleging that the complaint violated the no-contest clause of the trust and breached the settlement agreement. A Beaufort County Circuit Court Judge denied all of their requests, and the trustee sisters appealed.
Judge D. Garrison Hill, writing for a unanimous Court of Appeals panel, affirmed the trial court’s ruling, finding that the content of the ODC complaint was absolutely privileged, and the letters could not be construed as a contest of the trust agreement in any event because they could not affect the trustees or the administration of the trust.
The trustees argued that the problem was not the (privileged) complaint against their lawyer, but that the allegations in it also criticized their actions in administering the trust. Hill declined to carve out an exception to the privilege rule, however, calling the distinction “artificial” and concluding that it would be impractical to try to parse the allegations related to the trustees’ conduct from those related to their lawyer’s conduct.
And even if the letter did allege misconduct against the trustees, that still wouldn’t have triggered the no-contest clause, Hill wrote, noting that in South Carolina such clauses must be strictly construed to avoid forfeitures. (Such clauses are also unenforceable if the contest is supported by probable cause.)
“The clause here—which would disinherit a beneficiary who ‘directly or indirectly’ objects ‘in any manner’ to a Trustee’s good faith conduct—could, if construed literally, apply to a beneficiary who uses an intemperate tone, questions, or even flashes a disapproving eye-roll to a Trustee,” Hill wrote. “We do not doubt the Trustees’ patience may have been overextended by the Beneficiaries’ actions here. But viewing the no-contest clause as a whole, we are convinced the Settlor’s intent was to disinherit only those who disrupted or interfered with the actual administration of the trust. There is not a scintilla of evidence the ODC complaint caused such interference.”
Hill also rejected arguments that the letters to the ODC violated hold-harmless and indemnity clauses contained within the sisters’ settlement agreement, since the ODC had no authority over the non-lawyer trustees.
Kelly M. Jolley and Ariail B. Kirk of Jolley Law Group in Columbia represented Lenahan and Qualliu. Douglas Delaney of Bluffton, and Sean Bolchoz of Hilton Head Island represented Heslin and Mosley. Neither side’s attorneys responded to requests for comment on the court’s ruling.
The seven-page decision is Heslin v. Lenahan (Lawyers Weekly No. 011-090-19). The full text of the opinion is available online at sclawyersweekly.com.
Follow David Donovan on Twitter @SCLWDonovan