General Perry’s Terror Clause: Final Chapter (I think)

Within a couple weeks of oral arguments, we received a published opinion in the General Perry terror clause case that has been discussed in this blog before (really fast opinion).   To read the case, click here.

The result was not favorable to my client, but nonetheless appears to provide planners with the result advocated by our appeal – that is, there is no “safe harbor” tool with which to contest a terror clause.

To review, Beneficiary filed Motion to Determine Probable Cause.  Trial Court found no probable cause to contest the Trust, but refused to find that the act of bringing the motion was itself an attack on the Trust so as to invoke the terror clause penalty.

The Court of Appeals said that the trial court never should have accepted the motion to determine probable cause because it did not meet the jurisdictional requirements for the relief requested.  Because that issue was not raised at the trial level it was not preserved on appeal.  But the COA said that in this case the motion itself does not violate the terms of the terror clause of this trust.  Where that leaves us is – in our case the Beneficiary who brought the motion gets to keep his share of the trust – BUT in the future anyone who brings this type of motion should expect to have the motion dismissed without a hearing.  So the result is there is no safe harbor way to challenge a terror clause – but that doesn’t help my client.

The case is published – so it matters.  I had intended to seek leave to the Supreme Court if the Court of Appeals decision was not favorable.  But in light of the ruling, I think such an effort may not be warranted.  I thank Phil Harter (f.k.a. Judge Harter) of our office for his review and conclusions about the opinion.  Finally it should be noted that opposing counsel on this case, Doug Mielock, (a.k.a. my archnemisis) did an excellent job as usual – just hate losing to him.

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General Perry’s Terror Clause

I just filed a brief in an appeal that may be of interest to some of you.

The case involves the estate of Brigadier General Miller Perry, who died leaving a restated trust.

The restatement of the trust altered the beneficial shares.  One of the beneficiaries whose share of estate was reduced by the restatement filed a “Petition to Determine Probable Cause,” alleging that the restatement was the product of undue influence and requesting that the court determine that this beneficiary had probable cause to institute a trust contest.

I represented the Trustee.  In our response I asked the trial court to determine that there was no probable cause to contest the trust, and also that the filing of this Petition to Determine Probable Cause was a “contest” sufficient to trigger the forfeiture of interest provided in the “no contest” clause in General Perry’s Trust.

This issue arises because of the changes brought about by MCL 700.7113 of the Michigan Trust Code.  As you may recall, this section of the Trust Code says that a no contest clause will not be enforced by a trial court if the contestant had probable cause to initiate the action.  This statute changed Michigan law when it was adopted in 2010.  Before the adoption of the Trust Code, Michigan law strictly enforced no contest clauses.  Nacovsky v. Hall (In re Griffin), 483 Mich 1031, 766 NW2d 613 (2009). [I am proud to note that the Griffin case was successfully litigated by John Bos of our office.]

The issue before the Court of Appeals is whether the law allows a litigant a “free bite” at the apple.  That is, whether, by calling a pleading a Petition to Determine Probable Cause, the litigant/beneficiary is able to engage in discovery and have a hearing without being subject to the forfeiture of interest provisions of the no contest clause.  I argue that this is not the law, and should not be the law.

In my brief, among other things, I cite California’s experience.  California allowed parties in trust contests to seek declaratory judgment on this point by statute, but later determined that this process only promoted litigation, and repealed that law.

Stay tuned.

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