Opinion ID: 3152258
Heading Depth: 2
Heading Rank: 1

Heading: the threshold question of deference

Text: TO THE TRUSTEE’S DETERMINATION The ultimate question in this case — whether the trial court correctly set aside the trustee’s determination — requires us first to decide what, if any, judicial deference the trial court owed the trustee. The parties sharply differ on the answer to this threshold issue. Quoting from the text of the no-contest provision, the trustee points out that the trust obligated her to determine if any beneficiary had violated the provision. She could not look the other way in the face of an apparent violation because the provision stated that the violator’s share of the trust “shall be revoked,” id. at 299, if a violation occurred. The provision then ends the hearing on the motion for reconsideration, the trustee identified the court’s faulty recollection of the trust language, noting that the court had erroneously read the clause to prohibit challenges to or interference with the September trust agreement, rather than the trust itself. Because the clause actually reads “interference with the trust,” the trustee argued, “the logic of the decision . . . comes apart.” Id. The trustee also noted that the September 2012 amendment specifically “ratified and confirmed” the “Trust Agreement.” Id. at 300. 36 with a clear, but not absolute, allocation of delegable authority: “Absent proof of fraud, dishonesty, or bad faith on the part of my Trustee, the decision of my Trustee . . . shall be final.” Id. The sons concede that the text of the provision says what it says, but they contend that it violates §§ 64.2-703(B) and 64.2-777 of the Virginia Uniform Trust Code. They argue that these provisions, coupled with general equitable principles governing trusts, render unenforceable on public policy grounds the “shall be final” wording of the no-contest provision. From there, the sons reason that the trial court should have reviewed the trustee’s decision de novo (without the need for a last-minute bad faith finding) and should have concluded (for various other reasons) that the sons did not violate the no-contest provision. Consideration of this threshold issue should begin with a review of the history of nocontest provisions and the settled principles governing them. There appears to be something basic and natural about a giver wanting his gifts, particularly those given after his death, to be received without rancor and disputation. Examples of testamentary no-contest provisions date back to the ancient times. 4 English common law and chancery courts enforced no-contest provisions, subject to various limiting principles, throughout the 17th and 18th centuries. 5 Early American courts did as well. See, e.g., Smithsonian Inst. v. Meech, 169 U.S. 398, 415 (1898) (noting that “courts wisely hold” that a testator may “condition” a bequest on a requirement that a legatee “acquiesce” with the terms of the will). 4 See generally Gerry W. Beyer et al., The Fine Art of Intimidating Disgruntled Beneficiaries With In Terrorem Clauses, 51 SMU L. Rev. 225, 230-31 (1998). 5 Id. at 231-40; see also Olin L. Browder, Jr., Testamentary Conditions Against Contest, 36 Mich. L. Rev. 1066, 1093-96 (1938); Jack Leavitt, Scope and Effectiveness of No-Contest Clauses in Last Wills and Testaments, 15 Hastings L.J. 45, 47-49 (1963). 37 We have made clear that no-contest provisions are prima facie valid in Virginia. See Womble v. Gunter, 198 Va. 522, 525, 95 S.E.2d 213, 216 (1956) (approving such a provision in a will); Keener v. Keener, 278 Va. 435, 442, 682 S.E.2d 545, 548 (2009) (extending approval of no-contest clauses to trusts). Equally clear is that we have adopted no hard-and-fast rules governing their scope. It is the settlor’s intent that controls: “What activity or participation constitutes a contest or attempt to defeat a will depends upon the wording of the ‘no contest’ provision and the facts and circumstances of each particular case.” Keener, 278 Va. at 441, 682 S.E.2d at 548 (quoting Womble, 198 Va. at 529, 95 S.E.2d at 219); see also 1 T.W. Harrison & James P. Cox, Harrison on Wills and Administration for Virginia and West Virginia § 21.05[4], at 21-13 (4th ed. 2007). In Keener, a trust provision stated that any beneficiary who “objects to or contests” the trust “shall forfeit” his distributable share except for $1.00. 278 Va. at 439, 682 S.E.2d at 546. Quoting from Womble, we reaffirmed that the “wording of the ‘no contest’ provision” determines its scope and identifies the circumstances that constitute “a contest or attempt to defeat” the trust. Id. at 441, 682 S.E.2d at 548. We also emphasized that a no-contest provision should be “strictly enforced according to its terms,” even if doing so had the effect (at least in a pour-over trust) of “disinheriting all the members of the testator’s family,” including “infants” otherwise entitled to a distribution. Id. at 442, 682 S.E.2d at 548. “[C]ompelling reasons” justify the “strict enforcement” of such provisions, we held, because they protect the right of a testator or settlor “to dispose of his property as he sees fit” and safeguard “the societal benefit of deterring the bitter family disputes that will [and trust] contests frequently engender.” Id. (citing Womble, 198 Va. at 526-27, 532, 95 S.E.2d at 217, 220-21). Somewhat paradoxically, however, Keener also said that no-contest provisions should be 38 “strictly construed” because the testator or settlor “has the opportunity to select the language that will most precisely express [his] intent.” Id. at 442-43, 682 S.E.2d at 548. The synthesis of strict enforcement and strict construction makes sense only by separating the related, but conceptually distinct, issues of legal validity and textual construction. Virginia courts do not begrudgingly enforce no-contest provisions. To the contrary, the “clear terms” of such provisions must be “strictly enforced,” id. at 442-43, 682 S.E.2d at 548-49, without regard to the severity of the result. On the other hand, the inflexibility of strict enforcement cannot be predicated on supposed inferences of settlor intent that are not reflected in the actual text of a no-contest provision. In this sense, we strictly construe the text to the extent necessary to ensure that the plain meaning of the provision clearly calls for forfeiture, which, admittedly, is a result typically disfavored in law. 6 Keener is a good example of both ideas working together. We reaffirmed that the “wording of the ‘no contest’ provision and the facts and circumstances” of each case determined what “constitutes a contest” and an “attempt to defeat” the trust. Id. at 441, 682 S.E.2d at 548 (citation omitted). We also did not hesitate to say that such a provision should be strictly enforced. Even so, we held that the provision in that case, by its plain terms, applied only to contests of “any provision of this Trust” and did not purport to apply to contests of a related will. Id. at 443, 682 S.E.2d at 549 (emphasis added); accord Virginia Found. of Indep. Colls. v. Goodrich, 246 Va. 435, 439, 436 S.E.2d 418, 420 (1993) (holding that seeking guidance from the court in interpreting a will was not a challenge “questioning” the testator’s intent under the no- 6 On this point, I concur with Professor Leavitt’s reconciliation of these two seemingly discordant principles: “It is true that a forfeiture clause is to be strictly construed, but it is equally true that if the provisions are not strictured by law or by public policy they will be enforced according to the ascertained intent of the testator.” Leavitt, supra note 5, at 64. 39 contest clause in that case). The principle of strict construction precluded us from judicially extending the no-contest provision beyond its plain terms. In this case, the trustee argues that the no-contest provision passes easily through the filter of strict construction. Without proof that the trustee is guilty of “fraud, dishonesty, or bad faith,” her determination of whether a beneficiary has violated the no-contest provision “shall be final.” J.A. at 299. I agree that the plain meaning of this provision has no textual ambiguity requiring judicial strict construction. See generally Citizens’ Bank v. Parker, 192 U.S. 73, 85-86 (1904) (noting that the “proper office” of the rule of strict construction “is to help to solve ambiguities” but that “it is the judicial duty” to first “ascertain if doubt exists”). 7 Text that has a plain meaning needs no judicial construction. See Conner v. Hendrix, 194 Va. 17, 25, 72 S.E.2d 259, 265 (1952) (“‘The province of construction lies wholly within the domain of ambiguity.’ If it is too plain to misunderstand, there is nothing to construe.” (quoting Norfolk Motor Exch., Inc. v.Grubb, 152 Va. 471, 478, 147 S.E. 214, 216 (1929)); see also Virginia Broad. Corp. v. Commonwealth, 286 Va. 239, 249, 749 S.E.2d 313, 318 (2013); Smith v. Smith, 3 Va. App. 510, 513-14, 351 S.E.2d 593, 595-96 (1986). “An absolute unqualified sentence or proposition,” Sir Edward Coke reminds us, “needs no expositor.” 2 Sir Edward Coke, Institutes of the Laws of England 533 (15th ed. 1797) (translation of original text). Perhaps so, the sons respond, but this particular language should not be enforced because it violates the Virginia Uniform Trust Code and general equitable principles governing trusts. This argument, however, runs afoul of the principle of “strict enforcement” and the “compelling 7 See also Lincoln Nat’l Life Ins. v. Commonwealth Corrugated Container Corp., 229 Va. 132, 136-37, 327 S.E.2d 98, 101 (1985) (applying the principle of strict construction to an insurance policy “[b]ecause the policy language is ambiguous”); Williams v. Mutual of Omaha, 297 F.2d 876, 879 (4th Cir. 1962) (analyzing an insurance contract and stating that “no ambiguity arises for application of the principle of strict construction”). 40 reasons” recognized by law for such provisions, including the settlor’s right “to dispose of his property as he sees fit” and the accompanying “societal benefit of deterring the bitter family disputes that will [and trust] contests frequently engender.” Keener, 278 Va. at 442, 682 S.E.2d at 548 (citing Womble, 198 Va. at 526-27, 532, 95 S.E.2d at 217, 220-21). Contrary to the sons’ view, nothing in the Virginia Uniform Trust Code precludes strict enforcement of their father’s no-contest provision to the facts of this case. Code § 64.2- 703(B)(2) requires trustees to “act in good faith and in accordance with the terms and purposes of the trust and the interest of the beneficiaries.” See also Code § 64.2-777(B) (subjecting the trustee’s “exercise of a power . . . to the fiduciary duties prescribed by this article”). The nocontest provision does not offend this statutory duty. The provision itself requires the trustee’s determination to be disregarded if it is a product of “bad faith.” J.A. at 299. It also removes finality from any trustee’s determination infected by “fraud” or “dishonesty.” Id. It is true that Code § 64.2-765 also codifies the equitable duty of impartiality in the context of “two or more beneficiaries” and requires a trustee to treat “impartially” their “respective interests.” The “substantive” aspects of impartiality generally prohibit unfair “favoritism” between beneficiaries and require diligent “good-faith” efforts to honor the respective interests of competing beneficiaries. Restatement (Third) of Trusts § 79 cmt. c (2007); see, e.g., 14 George Gleason Bogert et al., The Law of Trusts and Trustees § 612, at 49 (3d ed. 2000) (noting that the impartiality duty is often implicated when a trustee’s “investment transactions” favor one set of beneficiaries over another). In this case, I see no need to address whether the equitable duty of impartiality is merely a conceptual species within the genus of fiduciary good faith or, instead, whether the two involve wholly dissimilar concepts. The sons do not assert any violation of Code § 64.2-765, nor did the 41 trial court find any evidence of impermissible partiality. This is understandable given that the stepmother did not gain any financial benefit from the trustee’s determination on the no-contest provision. The only real monetary contest was between the sons, as named remainder beneficiaries, and the charitable organizations, as contingent remainder beneficiaries. I also disagree that the trustee’s determination in this case was in defiance to “the terms and purposes of the trust and the interests of the beneficiaries.” Code § 64.2-703(B)(2). The nocontest provision is one of the “terms” of the trust that effectuates the “purposes” of the trust. Id. If either brother violated the provision, it declares that his share “shall be revoked.” J.A. at 299. The trustee complied with the terms and purposes of the trust when she shouldered the responsibility of determining whether the sons had violated their father’s emphatically worded prohibition on conduct that “directly or indirectly, by legal proceedings or otherwise” constituted a “challenge or contest” of “this trust agreement or any of its provisions” or constituted an “attempt in any way to interfere with the administration of this trust according to its express terms.” Id. (emphases added). The trustee’s exercise of her duties under the no-contest provision did not violate “the terms and purposes of the trust.” Code § 64.2-703(B)(2). The sons emphasize that the trustee’s duty to protect the “interests of the beneficiaries” still remains. Id. While this is true, a trustee cannot protect the beneficiaries’ interests more sedulously than the settlor intended. A no-contest provision represents strong medicine for the fractious intra-family contests that sometimes follow the death of a settlor. But it is the settlor’s assets being distributed to his beneficiaries. Thus, it is the settlor, not the beneficiaries, who 42 determines the legally recognizable “interests of the beneficiaries.” Id. The trustee cannot expand or contract those interests in violation of the settlor’s expressed intent. 8 In short, the no-contest provision in this case needs no judicial construction, strict or otherwise, with respect to the trustee’s role in determining whether a violation has occurred. The trustee’s determination “shall be final” absent “proof of fraud, dishonesty, or bad faith.” J.A. at 299. This delegation of discretion to the trustee benefits from the “strict enforcement” these provisions should be given by the courts in light of the “compelling reasons,” Keener, 278 Va. at 442, 682 S.E.2d at 548 (citing Womble, 198 Va. at 526-27, 532, 95 S.E.2d at 217, 220-21), for their presumed validity. The sons offer nothing from the Virginia Uniform Trust Code or general trust principles to rebut the judicial presumption of strict enforcement.