Di Portanova v. Monroe, 229 S.W.3d 324 (Tex. App.—Houston [1st Dist.] 2006, pet. denied).
Guardian of incapacitated beneficiary filed a declaratory judgment
action to determine whether it would be within the terms of the trust
for Trustees to make certain tax-motivated gifts from the trust and pay
the taxes thereon which together would total over $6.5 million. The
trial court issued a declaratory judgment that these expenditures would
be authorized. Trustees appealed.
The appellate court reversed. The court recognized that resolving a
trust dispute by way of a declaratory judgment is clearly authorized
under Civil Practice & Remedies Code § 37.004. But, in this case, there
was no justiciable controversy. Instead, Guardian’s action was in
actuality a request for an advisory opinion. The trust granted Trustees
the power to determine whether to make distributions and then those
distributions must be in the best interests of Beneficiary. Guardian was
attempting to side-step Trustees and have a court determine what would
be in Beneficiary’s best interest, rather than Trustees as Settlor
intended. Thus, the ultimate issue presented to the trial court, that
is, whether Beneficiary’s best interest would be served by making these
gifts, did not present a justiciable controversy for the court.
Moral: A beneficiary who wishes the trustee of a discretionary trust to
take some action cannot obtain a declaratory judgment that such action
would be within the trustee’s powers and then force the trustee to take
that action.
Wills
No Contest Clause
Not Breached
Beneficiary’s guardian brought a declaratory judgment action to
determine whether it would be within the terms of the trust for Trustees
to make certain tax-motivated gifts from the trust and pay the taxes
thereon which together would total over $6.5 million. Trustees asserted
that this action triggered the in terrorem clause of the will. The trial
court held that clause was not triggered and the parties who would
benefit from a forfeiture appealed.
The appellate court affirmed. The clause provided for forfeiture if a
beneficiary brings an action “for the purpose of modifying, varying,
setting aside or nullifying any provision” of the will. The court
determined that the declaratory judgment action did not fall within the
scope of this clause. The court rejected the argument that the
declaratory judgment would have, in effect, changed the beneficiaries of
the trust because of the gifts that would occur. The court explained
that the action was actually to clarify the authority of Trustees, not
to alter it.
Moral: A no contest clause is unlikely to be triggered by actions to
ascertain the extent of a fiduciary’s authority.