Keener v. Keener, Record No. 082280 (Virginia Supreme Court, Sept. 18, 2009)

In 2003, Hollis Keener executed a pour-over will and a revocable trust prepared by his estate planning attorney. His trust, which was intended to be the primary vehicle for carrying out his estate plan, provided for the distribution of his assets after his death in equal shares to his seven children. At the same time, he executed four addenda to his trust addressing trustee powers, the transfer of property to the trust, a gift of a car to one child, and the retention of the shares for two of his children in lifetime trusts. In 2005, he executed a fifth addendum providing that the shares for certain of his children would be applied first to the repayment of certain loans.

In March 2007, Mr. Keener's oldest son, Hollis, visited his father who was at that time residing with his daughter Brenda and her husband. When Hollis arrived, another of Mr. Keener's daughters, Debra, was examining Mr. Keener's estate planning documents and arguing with Brenda. Debra took the papers from the house, made copies, and then returned the papers. Thereafter, Debra was on speaking terms with only one of her siblings. A few weeks after this incident, Mr. Keener executed a final addendum to his trust adding a no-contest clause to the trust. He did not add a no-contest clause to his will.

Mr. Keener died in August 2007. Hollis had possession of the original will, but did not offer it for probate because he believed everything was handled under the trust. Hollis told his siblings that "there really was no will" and that the will "referred everything to the trust." Debra checked court records for the probated will, and finding none, unsuccessfully attempted to probate a copy of the will.

In October 2007, Debra applied for and was appointed administratrix of her father's estate, and represented under oath that her father died intestate. Shortly thereafter, Hollis, as successor trustee of his father's trust, made partial distributions out of the trust to his siblings, but stopped payment on the check to Debra on the grounds that Debra had violated the no-contest clause in the trust by qualifying as administratrix.

Hollis, joined by two other siblings, petitioned the circuit court seeking probate of the original will, removal of Debra as administratrix, and appointment of Hollis as personal representative. In the petition, Hollis alleged that Debra's actions amounted to a contest of the trust. Debra filed an answer and a counterclaim alleging multiple counts of breach of fiduciary duty. Debra amended her counterclaim seeking to remove the trustees or subject them to the supervision of the Commissioner of Accounts. Hollis and the other petitioners answered accusing Debra of fraud, perjury, unclean hands, and estoppel.

The circuit court admitted the will to probate and terminated Debra's authority as administratrix, but denied Hollis's request for attorneys' fees. The circuit court also ruled that Debra's action in qualifying as administratrix was a contest of the trust because, had she been successful, she would have distributed all of Mr. Keener's assets to his intestate heirs rather than to the trust, and held that she forfeited her interest under the trust and had no standing to bring claims against the trustees.

On appeal, the Virginia Supreme Court held, as a matter of first impression in Virginia, that the court would give full effect to no-contest provisions in trusts for the same reasons that support the enforcement of those provisions in wills where, as here, the testator relied on the trust as part of the testamentary estate plan (the will was a "pour-over" will) and the testator relied on the trust for the disposition of his property. The court noted that the compelling reasons for strictly enforcing no-contest clauses are the protection of a testator's right to dispose of his property as he sees fit, and the societal benefit of deterring the bitter family disputes frequently engendered by will contests.

The court observed that no-contest clauses in Virginia are strictly construed for two reasons: (1) the testator or a skilled draftsman at his direction has the opportunity to select the language to best carry out a testator's intent; and (2) forfeitures are not favored in the law and are only enforced on their clear terms.

Applying these principles, the Virginia Supreme Court concluded that Debra's actions failed to violate the no-contest clause in the trust because her action, if successful, would have thwarted the pour-over provision in the will, and not the trust, and the will did not contain a no-contest clause. Accordingly, the court reversed the circuit court and remanded the case.

The Virginia Supreme Court observed twice in its opinion that Debra's demand for removal of the trustees amounted to a contest, but that issue was not before the court because it was not raised at trial or presented on appeal.