Wilson v. Patterson

          ORDER

          Honorable Steven P. Logan United States District Judge

         Plaintiff Kelly Wilson (the “Plaintiff”) filed suit against her stepmother Deborah Patterson (the “Defendant”) seeking a declaratory judgment regarding the validity of a trust agreement. (Doc. 58) The Defendant moved for summary judgement on each of the Plaintiff's claims against her (the “Motion”). (Doc. 75) The Motion was fully briefed on May 14, 2018. (Docs. 87, 88) The Court's ruling is as follows.

         I. Background

         On October 8, 2006, Robert Patterson (“Decedent Patterson”) and the Defendant met with an attorney and a financial advisor to execute the documents necessary to create an estate planning trust (the “Patterson Trust”). (Doc. 76 at 4) The Patterson Trust consisted of six warranty deeds representing eleven properties that were owned by Decedent Patterson and the Defendant as joint tenants with rights of survivorship. (Doc. 76 at 5) The terms of the Patterson Trust provided that in the event that either Decedent Patterson or the Defendant died, the surviving spouse would serve as sole trustee of the Patterson Trust, and the terms of the Patterson Trust provided the surviving spouse with the ability to modify, amend or revoke the Patterson Trust. (Doc. 58 at 21) Decedent Patterson's daughter, the Plaintiff, was listed as the “First Successor Trustee” under the Patterson Trust. (Doc. 58 at 18) Under the terms of the Patterson Trust, the Plaintiff was intended to serve as trustee upon the deaths of both Decedent Patterson and the Defendant. (Doc. 58 at 18)

         On July 20, 2016, Decedent Patterson died. (Doc. 76 at 9) The Defendant, as the surviving spouse and sole trustee, revoked the Patterson Trust on August 20, 2016. (Doc. 76 at 9) The Defendant then transferred the assets present in the former Patterson Trust to the newly created Deborah A. Patterson Trust, naming her own issue as contingent beneficiaries. (Doc. 76 at 10) The Plaintiff initiated this action on December 5, 2016, alleging causes of action for breach of fiduciary duty and reformation of the trust, among other relief. (Doc. 76 at 10)

         II. Legal Standard

         A court shall grant summary judgment if the pleadings and supporting documents, viewed in the light most favorable to the non-moving party, “show that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Material facts are those facts “that might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine dispute of material fact arises if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

         The party moving for summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the record, together with affidavits, which it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. If the movant is able to do such, the burden then shifts to the non-movant who, “must do more than simply show that there is some metaphysical doubt as to the material facts, ” and instead must “come forward with ‘specific facts showing that there is a genuine issue for trial.'” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).

         III. Analysis

         The Defendant moves for summary judgment on each of the Plaintiff's claims. The Court finds that there is no genuine dispute as to the material facts of this lawsuit and addresses each claim in turn.

         A. Declaratory Judgment

         The Plaintiff seeks a declaratory judgment from the Court deciding whether the Patterson Trust was revoked and whether the Plaintiff has any rights under the Patterson Trust. (Doc. 58 at 6) The Defendant argues that she should be granted summary judgment on the Plaintiff's declaratory judgment claim because the Plaintiff does not have a definite interest in the Patterson Trust sufficient to create a justiciable controversy. (Doc. 75 at 16) Specifically, the Defendant argues that the Plaintiff's lawsuit triggered the “no-contest” provision of the Patterson Trust, effectively invalidating the Plaintiff's interest as a contingent beneficiary under the trust. (Doc. 75 at 16)

         The first issue before the Court is whether the Plaintiff's challenge to the Patterson Trust eliminated her interest as a contingent beneficiary of the trust. Prior to bringing any claims against the Defendant, the Plaintiff was listed as the “First Successor Trustee” under the terms of the Patterson Trust, and, on this basis, brought the present claims challenging the terms of the Patterson Trust. (Doc. 58 at 18) The Defendant cites the “no-contest” provision of the Patterson Trust, which states, “ [i]f any beneficiary under this trust, singly or in conjunction with any other person, whether directly or indirectly: (1) contests or in any manner attacks or seeks to impair or invalidate any of the provisions of this trust, . . . then, in that event, all distributions given under this trust to that person shall be forfeited as though he or she failed to survive Robert J. Patterson and Deborah A. Patterson.” (Doc. 58 at 33)

         Under Arizona law, no-contest provisions are generally enforceable; however, a court may decline to enforce a no-contest clause where the challenges to the trust were brought with probable cause. In re Shaheen Tr., 341 P.3d 1169, 1172 (Ct. App. 2015). Probable cause means “the existence, at the time of the initiation of the proceeding, of evidence which would lead a reasonable person, properly informed and advised, to conclude that there is a substantial likelihood that the contest or attack will ...