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STATE OF MICHIGAN COURT OF APPEALS

In re MARY E. GRIFFIN Revocable Grantor Trust.

OTTO NACOVSKY, Petitioner-Appellee, v PRISCILLA HALL, Trustee, Respondent-Appellant.

FOR PUBLICATION December 2, 2008 9:00 a.m. No. 277268 Shiawassee Probate Court LC No. 05-032492-TV Advance Sheets Version

Before: Hoekstra, P.J., and Cavanagh and Zahra, JJ. HOEKSTRA, P.J. This case involves the enforceability of the in terrorem (no-contest) clause in the Mary E. Griffin Revocable Grantor Trust agreement. Respondent appeals as of right the probate court's order declaring the clause unenforceable and denying her motion for summary disposition under MCR 2.116(C)(9) and (10). Although MCL 700.2518 does not apply to trusts, we conclude that it reflects this state's public policy that a no-contest clause in a trust agreement is unenforceable if there is probable cause for challenging the trust. We further conclude that petitioner, Otto Nacovsky, had probable cause to challenge the trust because the trust, on its face, violated the rule against perpetuities. Therefore, the in terrorem clause was unenforceable, and we affirm the probate court's order denying respondent's motion for summary disposition. I Respondent, Priscilla Hall, is the daughter of petitioner. They are both beneficiaries under a trust created by Mary E. Griffin, who is petitioner's mother and respondent's grandmother. The trust was established in 2001, and the trust agreement was amended several times thereafter, including in January 2003 and May 2003. The January 2003 amendment added the following clause to the trust agreement: Terror [sic] Clause. If any beneficiary under this Agreement or any heir of Settlor, or any person acting, with or without court approval, on behalf of a beneficiary or heir, shall challenge or contest the admission of Settlor's will to probate, or challenge or contest any provision of Settlor's will or of this

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Agreement, the beneficiary or heir shall receive no portion of Settlor's estate, nor any benefits under this Agreement. However, it will not be a "challenge or contest" if Trustee or a beneficiary seeks court interpretation of ambiguous or uncertain provisions in this Agreement. After Griffin died in January 2005, petitioner filed a petition contesting the trust. Petitioner alleged that the trust violated the rule against perpetuities because the trust agreement, as last amended on May 1, 2003, provided that the principal was to be held in trust for the benefit of petitioner and Griffin's dogs, but failed to include a provision for the distribution of the trust corpus after the death of petitioner and the dogs. Petitioner also alleged that Griffin's last two amendments in January 2003 and May 2003 resulted from respondent's undue influence over Griffin. Respondent filed a petition to enforce the in terrorem clause. She claimed that, because petitioner had challenged the validity of the trust, if petitioner failed to substantiate his claim of undue influence, petitioner was not entitled to receive anything under the trust. Following an evidentiary hearing, the probate court determined that the perpetuities problem was the result of a drafting error, and it reformed the trust agreement to remedy the omission of the residuary clause. The court also determined that there was no undue influence. Petitioner thereafter filed a motion alleging defenses to the in terrorem clause. Respondent in turn moved for summary disposition pursuant to MCR 2.116(C)(9) and (10), arguing that the in terrorem clause was both enforceable and applicable because petitioner had challenged the trust. The probate court determined that because MCL 700.2518 applied to wills but not trusts, the Legislature intended that no-contest clauses in trust agreements be unenforceable. Accordingly, the probate court held that the in terrorem clause in the Mary E. Griffin Revocable Grantor Trust agreement was unenforceable as a matter of law, and it denied respondent's motion for summary disposition. II On appeal, respondent does not contest the probate court's conclusion that MCL 700.2518 only applies to wills. Rather, she contests the probate court's conclusion that because the Legislature did not include a provision regarding no-contest clauses in trust agreements in the Estates and Protected Individuals Code, MCL 700.1101 et seq., a no-contest clause in a trust agreement is unenforceable. Respondent argues that the enforceability of a no-contest clause in a trust agreement must be gleaned from the common law relating to no-contest clauses in wills. We disagree. A This Court reviews de novo a lower court's decision on a motion for summary disposition. Trost v Buckstop Lure Co, Inc, 249 Mich App 580, 583; 644 NW2d 54 (2002). Below, respondent argued that summary disposition was proper under MCR 2.116(C)(9) because the defense petitioner asserted to her petition to enforce the in terrorem clause--that he had probable cause for challenging the trust--was not a defense to the enforcement of a no-contest clause in a trust agreement. A motion under MCR 2.116(C)(9) tests the sufficiency of a defendant's pleadings and is properly granted when the party has failed to state a valid defense to a claim. A defense is invalid for purposes of MCR 2.116(C)(9) when the party's pleadings are

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so clearly untenable as a matter of law that no factual development could possibly deny the opposing party's right to recovery. Payne v Farm Bureau Ins, 263 Mich App 521, 525; 688 NW2d 327 (2004). B Whether the in terrorem clause in the Mary E. Griffin Revocable Grantor Trust agreement is enforceable requires us to ascertain our state's public policy regarding the enforceability of no-contest clauses in trust agreements. If no-contest clauses in trust agreements are against public policy, then the in terrorem clause at issue here is unenforceable. 2 Restatement Trusts, 3d,

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