THIRD DIVISION MILLER, P. J., RAY and BRANCH, JJ.
NOTICE: Motions for reconsideration must be physically received in our clerk’s office within ten days of the date of decision to be deemed timely filed. (Court of Appeals Rule 4 (b) and Rule 37 (b), February 21, 2008) http://www.gaappeals.us/rules/
March 29, 2013
In the Court of Appeals of Georgia A12A0653. CALLAWAY v. WILLARD. A12A2323. DURHAM v. DURHAM, et al.
B RANCH, Judge.
These related appeals arise from a declaratory judgment action filed in Tattnall
County Superior Court by William E. Callaway, Jr., in his capacity as Trustee of the
Marjorie H. Durham Irrevocable Trust, to determine the effect of an in terrorem clause
in the Trust documents. The Trust donor, Marjorie H. Durham, executed the inter
vivos trust in 2000, naming herself as a beneficiary and her four children as residual
beneficiaries. Following M rs. Durham’s death, Callaway filed a complaint for
declaratory judgment against the four trust beneficiaries, seeking an order declaring
that three of the beneficiaries, Wallace Bryant Durham (“Bryant”), Hugh Lee Durham
(“Lee”), and Lucinda Durham Willard (“Lucinda”), had forfeited their respective interests in the Trust estate under the in terrorem clause and that the entirety of the
estate should therefore be distributed to the fourth beneficiary, Lawrence H. Durham.
(“Lawrence”).1 Lawrence filed a counterclaim and a cross-claim and later moved for
summary judgment, alleging that because he was the only child who did not violate
the in terrorem clause, he is the sole beneficiary of the residue of the trust estate.
Lucinda also filed a motion for summary judgment, alleging that she had not violated
the in terrorem clause and remains a valid beneficiary of the trust. The trial court
granted Lucinda’s motion for summary judgment and denied Lawrence’s. In Case No.
A12A0653, Callaway appeals from the trial court’s grant of summary judgment in
favor of Lucinda. In Case No. A12A2323, Lawrence appeals the denial of his motion
for summary judgment as to Bryant and Lee. For reasons explained below, we find no
error in either case, and therefore affirm both orders of the trial court. We also remand
Case No. A12A2323 for further proceedings consistent with this opinion.
The standard for summary judgment is well-settled:
Summary judgment is warranted when any material fact is undisputed, as shown by the pleadings and record evidence, and this fact entitles the
1 During the pendency of this appeal, Lawrence H. Durham died. His son, Lawrence Cody Durham, was thereafter substituted as a party in his capacity as the personal representative of his father’s estate.
2 moving party to judgment as a matter of law. So, to prevail on a motion for summary judgment, the moving party must show that there is no genuine dispute as to a specific material fact and that this specific fact is enough, regardless of any other facts in the case, to entitle the moving party to judgment as a matter of law.
(Citations omitted.) Strength v. Lovett, 311 Ga. App. 35, 39 (2) (714 SE2d 723)
(2011). We review a trial court’s ruling on summary judgment de novo, “viewing the
evidence in the record, as well as any inferences that might reasonably be drawn from
that evidence, in the light most favorable to the nonmoving party.” (Citation and
punctuation omitted.) Beale v. O’Shea, 319 Ga. App. 1, 2 (735 SE2d 29) (2012).
Here, the relevant facts in the record are undisputed, and the evidence shows
that on or about April 13, 2000, Mrs. Durham executed an irrevocable trust agreement
naming herself as a beneficiary and Callaway as trustee. The Trust instrument
provided that, upon M rs. Durham’s death, the Trust assets would be divided according
to Paragraph 4 (f), which states:
all of the property remaining in the hands of the Trustee shall be distributed to my four children, with the properties designated as Trust Tract A being conveyed to Lawrence H. Durham in fee simple, and the properties designated as Trust Tract B being conveyed to Bryant Durham, Lee Durham and Lucinda D. Willard in fee simple. . . .
3 The Trust instrument also contains an in terrorem clause, which provides as
follows:
Should any one of my four children seek or file a legal or equitable challenge to the management decisions made or proposed by my trustee during the administration of this Trust, or pertaining to the management of the Trust Estate, or in regards to the final distribution of the Trust Estate, and be unsuccessful in said legal or equitable challenge, then said child or children shall, as of said date that the challenge is determined adversely to said child or children, forfeit any right, title or interest in said Trust Estate, and the said interest of the child or children making such challenge, less all reasonable attorney fees and expenses incurred by my Trustee, shall pass in the final distribution of the Trust Estate in fee simple to the remaining child or children who did not join in said legal or equitable challenge, and my Trustee shall make, in his sole discretion, any necessary division of the two Trust Tracts so as to maintain the above stated plan for the division of ownership of said Trust Estate between my children.
(Emphasis supplied.)
The Evans County Action
On March 2, 2001, approximately one year after the creation of the Trust,
Bryant and Lee filed suit in the Superior Court of Evans County against Callaway,
individually and in his capacity as trustee. They subsequently filed an amended
4 complaint, alleging that Callaway was Lawrence’s personal attorney and that he
functioned as Lawrence’s agent ; that Lawrence was significantly indebted to Mrs.
Durham and stood to benefit disproportionately from the testamentary provision of the
Trust; that Callaway had drafted the Trust instrument so as to guarantee himself an
annual income of $35,000 from the Trust, regardless of whether he performed any
services for the Trust and regardless of whether the Trust had liquid assets available
to pay him; that Mrs. Durham lacked the requisite mental capacity to execute the Trust
instrument, a warranty deed transferring certain real property to the Trust, and her
affirmation of the Trust; and that both the Trust and Mrs. Durham’s subsequent
affirmation of the Trust were null and void, because they resulted from Lawrence’s
exercise of undue influence, coercion, and duress against Mrs. Durham. The complaint
therefore sought an order: (i) setting aside the Trust and M rs. Durham’s later
ratification of the Trust; (ii) canceling the warranty deed conveying property to the
Trust; (iii) ordering an accounting of Trust property; and (iv) removing Callaway as
Trustee and appointing a different, temporary trustee pending the outcome of the
litigation. The complaint also sought an award of damages against Callaway.
On June 6, 2001, Bryant and Lee filed a motion in the Evans County action
seeking an injunction and temporary restraining order to prevent Callaway from
5 liquidating certain timber assets owned by the Trust. The motion, which sought to
preserve the status quo pending a decision in the Evans County action, requested entry
of an order that would allow Callaway to encroach upon Trust assets, but only after
first receiving permission from the court to do so. Although no ruling on this motion
appears in the record, there is some evidence indicating that an order was entered
requiring Callaway, at least under some circumstances, to obtain court approval before
encumbering trust assets.
At a hearing held on October 29, 2001, the trial court discussed with counsel
for all parties the possibility of staying the Evans County action pending the resolution
of the guardianship proceeding then ongoing in Tattnall County. Specifically, the
court noted that the issue of whether Mrs. Durham met the standard for guardianship
could also resolve one of the central issues in the Evans County action, namely
whether Mrs. Durham was competent to execute the Trust instrument, the warranty
deed, and the affirmation of the Trust. The parties agreed, and on November 6, 2001,
the trial court entered an order staying the Evans County action pending the outcome
of the guardianship proceeding. On April 19, 2002, several months after the Petition
for Guardianship was denied, Bryant and Lee voluntarily dismissed the Evans County
action.
6 The Guardianship Action
On May 17, 2001, Bryant, Lee, and Lucinda filed a petition for guardianship
of their mother in the Probate Court of Tattnall County. The guardianship was sought
on the grounds that Mrs. Durham was incapacitated by Alzheimer’s disease. As part
of the guardianship proceeding, Mrs. Durham underwent a court-ordered medical
exam, and the examining physician reported that, in his opinion, she did not meet the
standard for guardianship. Based on this report, the probate court dismissed the
guardianship petition, and Bryant, Lee, and Lucinda appealed that decision to the
Tattnall County Superior Court.
Following a trial on the issue of Mrs. Durham’s competency, a jury found that
she was not incapacitated. The Tattnall County Superior Court entered judgment on
that verdict and denied the guardianship petition on January 10, 2002.
The Current Action
Following Mrs. Durham’s death in 2009, Callaway filed the current action
seeking a declaratory judgment that Bryant, Lee, and Lucinda had violated the in
terrorem clause of the Trust instrument, had thereby forfeited their rights to inherit
under that instrument, and that all Trust property should therefore be distributed to
Lawrence. In response, Lawrence filed a counterclaim against Callaway and cross-
7 claims against each of his siblings. Lawrence also sought an order holding that Bryant,
Lee, and Lucinda had forfeited their rights in Mrs. Durham’s estate and that Callaway
should therefore distribute all Trust property to Lawrence.
Lucinda filed motions for summary judgment against both Callaway and
Lawrence as to the claims asserted by each against her. Lawrence responded by filing
a motion for summary judgment on his counterclaim against Callaway and his cross-
claims against his siblings. On July 6, 2011, the trial court entered two separate orders,
one of which granted Lucinda’s motion for summary judgment against Callaway and
entered final judgment in her favor, and the other of which granted Lucinda’s motion
for summary judgment against Lawrence, denied Lawrence’s motion for summary
judgment as to Lucinda, and entered final judgment in Lucinda’s favor. The following
week, the trial court entered an order denying Lawrence’s motion for summary
judgment as to his cross-claims against Bryant and Lee. The trial court subsequently
certified that order for immediate review. These appeals followed. In Case No.
A12A0653, we address whether the guardianship proceedings violated the in terrorem
clause; in Case No. A12A2323, we address whether the Evans county action violated
that clause.
8 1. Before addressing the individual appeals, we first note that the terms of the
in terrorem clause at issue show that a beneficiary violates that clause only if two
conditions are met. First, the beneficiary must “seek or file” an action that challenges
either: (i) “the management decisions made or proposed by [the] Trustee during the
administration of th[e] Trust”; (ii) “the management of the Trust Estate”; or (iii) “the
final distribution of the Trust Estate.” (Emphasis supplied.) Second, the beneficiary
must be unsuccessful in his or her challenge – i.e., the challenge must be “determined
adversely to” the beneficiary.
We further note that although in terrorem “clauses are permitted by statute,
[OCGA § 53-12-22 (b)], [they] are not favored in the law.” (Citation omitted.)
Linkous v. National Bank of Ga., 247 Ga. 274 (274 SE2d 469) (1981). Furthermore,
“[b]ecause in terrorem clauses result in forfeitures, they must be strictly construed.”
(Footnote omitted.) Preuss v. Stokes-Preuss, 275 Ga. 437 (569 SE2d 857) (2002).
Further, our Supreme Court has held that, as a matter of public policy, in terrorem
clauses may not be construed so as to immunize a fiduciary from the law that imposes
certain duties upon and otherwise governs the actions of such fiduciaries. See Sinclair
v. Sinclair, 284 Ga. 500, 502-503 (2) (670 SE2d 59) (2008) (holding that “a condition
9 in terrorem cannot make [a fiduciary] unanswerable for any violations of . . . the laws
governing personal representatives in Georgia”) (emphasis supplied).
Bearing in mind both the terms of the in terrorem clause at issue and the
relevant law governing the interpretation of that clause, we now turn to the merits of
these appeals.
Case No. A12A0653
2. In this appeal, Callaway challenges the order granting Lucinda’s motion for
summary judgment against him and entering final judgment in Lucinda’s favor,
arguing that the trial court erred in finding that the filing of the guardianship petition
did not violate the in terrorem clause and that Lucinda was not a party to the Evans
County action. We find no merit in either of these claims.
(a) The guardianship petition alleged that Mrs. Durham had been diagnosed
with Alzheimer’s disease in October, 1998; that she had refused treatment for the
disease since October, 1999; and that as a result she was incapacitated. The petition
therefore sought the appointment of a guardian over Mrs. Durham’s “person and/or
property.” The petition did not mention the Trust or the trustee. Moreover, by simply
seeking control over Mrs. Durham’s property, by its terms the petition did not seek
control over any property held by the Trust. Accordingly, the filing of the
10 guardianship petition did not violate the in terrorem clause, as it did not challenge the
management decisions of the trustee, the management of the Trust estate, or the final
distribution of the Trust estate.
Callaway, however, seeks to avoid this obvious conclusion. First, Callaway
points to the fact that the attorney who represented Bryant and Lee in the Evans
County action also represented the brothers and Lucinda with respect to the
guardianship petition. He then cites to the following statement made by that attorney,
John Tatum, to the court during a hearing in the Evans County action, approximately
one month before the guardianship petition was filed:
This is a suit actually to set aside a trust. . . . I do indeed represent Mrs. Durham’s - two of her children and possibly could a third. They are convinced that their mother is incompetent. . . . She is an incompetent person who does not have an appointed representative at this time because . . . there’s been no guardianship proceeding. W e intend to initiate a guardianship proceeding . . . in [Mrs. Durham’s] home county. And if – and at the conclusion of that, then we would substitute the appointed guardian in lieu of the two sons as next friend.
Relying on this statement, Callaway argues that the underlying purpose of the
guardianship action was to facilitate the Evans County action and so the guardianship
11 petition should be viewed as part of that action. So viewed, says Callaway, as the
Evans County action violated the in terrorem clause so did the guardianship petition.
Callaway’s argument on this issue is without merit. Notably, it ignores the fact
that the guardianship petition did not, in fact, facilitate the Evans County action. In
other words, the Evans County action could, and did, exist regardless of whether
Bryant, Lee, and Lucinda filed a guardianship petition. More importantly, however,
this argument also ignores the legal requirement that an in terrorem clause be
construed narrowly. So construed, the plain language of the clause at issue applies
only to those actions that, in and of themselves, constitute a direct challenge to either
the management decisions of the trustee, the overall management of the Trust estate,
or the final distribution of the Trust estate. We cannot, as a matter of law, broaden this
language so that the in terrorem clause encompasses actions that may be merely
ancillary or indirectly related to actions that constitute such a direct challenge. See
Sinclair, supra at 502; Preuss, supra at 437.
(b) Callaway also contends that the trial court erred in finding that Lucinda was
not a party to the Evans County action, arguing the evidence shows that although she
was not a named party, she was a de facto party to that proceeding. Again, however,
this argument ignores the law requiring us to construe in terrorem clauses narrowly.
12 We are therefore constrained to interpret the clause in this case as meaning that before
a beneficiary will be deemed to have forfeited his or her right to inherit, he or she
must have been an actual, named party to some proceeding that challenged the
management decisions of the trustee, the overall management of the Trust estate, or
the final distribution of the Trust estate. And it is undisputed that Lucinda was not a
named party to the Evans County action.
Moreover, we note that Callaway has offered no evidence to prove his claim
that Lucinda was a de facto party to the Evans County action. In support of his
argument, Callaway relies on two statements by attorney John Tatum regarding his
potential and actual representation of Lucinda. The first of those statements is the one
set forth above, made to the court in the Evans County action. The second statement
was made by Tatum during a deposition taken as part of the Evans County litigation.
At the outset of that deposition, Tatum introduced himself to the witness and said: “I
represent . . . two of Mrs. Durham’s sons and . . . her daughter, three of her four
children.”
Despite Callaway’s assertions to the contrary, neither of these statements shows
that Lucinda was a de facto party to the Evans County action. In his statement to the
court, Tatum did not claim to represent Lucinda with respect to the Evans County
13 case; rather, he told the court that, as of that time, he represented two of Mrs.
Durham’s children and “possibly could a third.” (Emphasis supplied.) And read in
context, the most logical interpretation of this statement is that, at that time, Tatum
simply thought there was a possibility that Lucinda would be a named party in the
Evans County action. That possibility, however, never became a reality. Additionally,
when Tatum stated to the deposition witness that he represented three of Mrs.
Durham’s four children he was, in fact, representing Bryant, Lee, and Lucinda in the
guardianship proceedings. That statement therefore, cannot be interpreted as meaning
that Tatum represented Lucinda in the Evans County action.
Most importantly, the conclusion that Lucinda was not a party to the Evans
County action, as well as the conclusion that Tatum did not represent her with respect
to that action, is supported by the only sworn testimony of record. In support of her
motion for summary judgment, Lucinda submitted both her own sworn affidavit as
well as the affidavit of attorney Tatum. In her affidavit, Lucinda averred that she was
not a party to the Evans County action, she did not file the Evans County action, and
she did not seek a legal or equitable ruling through the Evans County action. Lucinda
further stated that while Tatum represented her with in the guardianship proceedings,
he did not represent her with respect to the Evans County action. Tatum’s affidavit
14 contained substantively identical testimony, with Tatum averring that Lucinda was not
a party to the Evans County action and that neither he nor his law firm represented her
with respect to that action. . Given that this evidence was uncontroverted, the trial
court did not err in concluding that Lucinda was not a party to the Evans County
action. See Strength, supra at 39 (2) (where on a motion for summary judgment a
defendant presents evidence that defeats an essential element of the plaintiff’s case,
“the plaintiff cannot rest on his pleadings, but rather must point to specific evidence
[in the record] giving rise to a triable issue”) (citation and punctuation omitted).
Accordingly, we affirm the trial court’s grant of summary judgment in favor of
Lucinda and against Callaway, as well as the entry of final judgment in favor of
Lucinda.
Case No. A12A2323
3. In this case, Lawrence contends that the trial court erred in denying his
motion for summary judgment as to his claims against Bryant and Lee because both
the guardianship proceedings and the Evans County action violated the in terrorem
clause as a matter of law, and because Bryant and Lee were unsuccessful in both those
actions. Lawrence further asserts that Bryant and Lee violated the in terrorem clause
when they filed their motion in the Evans County action for injunctive relief, seeking
15 to prevent Callaway from liquidating or encumbering Trust assets. Lawrence’s claim
as to the guardianship proceeding is mooted by our finding in Division 2, that the
filing of the guardianship petition did not violate the in terrorem clause. We further
find, as matter of law, that neither the filing of the complaint in Evans County nor
Bryant and Lee’s motion for injunctive relief violated the in terrorem clause.
(a) We first address whether the allegations contained in and the relief sought
by way of the Evans County complaint shows that the filing of that complaint violated
the in terrorem clause – i.e., whether the allegations made or the relief requested
challenged either Callaway’s management decisions during his administration of the
Trust, his overall management of the Trust estate, or the final distribution of the Trust
estate.
As noted supra, the Evans County complaint alleged, in part, that Mrs. Durham
lacked the requisite mental capacity to execute the Trust instrument, the warranty deed
transferring certain real property to the Trust, and her affirmation of the Trust; and that
both the Trust and Mrs. Durham’s subsequent affirmation of the Trust were null and
void, because they resulted from Lawrence’s exercise of undue influence, coercion,
and duress against M rs. Durham. With respect to these claims, the complaint sought
an order: (i) setting aside the Trust and Mrs. Durham’s later ratification of the Trust;
16 and (ii) canceling the warranty deed conveying property to the Trust. We find that the
allegations regarding Mrs. Durham’s incompetency and the resulting requests to have
the Trust, the Trust ratification, and the warranty deed set aside did not violate the in
terrorem clause, as they in no way related to the management of the Trust estate, nor
did they challenge either Callaway’s management decisions in administering the Trust
or the final distribution of the Trust estate. Rather, these allegations and requests for
relief challenged the validity of the Trust and the Trust documents.
The Evans County complaint further alleged that Callaway had long served as
Lawrence’s personal attorney; that he had drafted the Trust instrument so as to
guarantee himself payment of at least $35,000 per year, regardless of whether he
actually performed any services as trustee and regardless of whether the Trust had
liquid assets available to pay him; and that he had drafted the Trust instrument so as
to favor his long-time client, Lawrence, at the expense of both Mrs. Durham and
Lawrence’s siblings. With respect to these allegations, the complaint sought the
removal of Callaway as the trustee, an accounting of Trust property, and the payment
of damages. These allegations, and the relief sought based thereon, were based upon
Callaway’s ethical and fiduciary conduct in setting up the Trust. As such, they
challenged certain provisions in the Trust documents and Callaway’s appointment as
17 trustee; they did not challenge Callaway’s conduct in administering, managing, or
distributing the Trust, after he became the trustee. Specifically, Bryant and Lee sought
the removal of Callaway as trustee and an accounting of Trust assets not because of
any decisions or conduct by Callaway in managing those assets; rather, they sought
that relief because, based on Callaway’s alleged conflict interest, he had not and could
not fulfill his fiduciary duties as trustee. Given that in terrorem clauses cannot be
construed so as to immunize fiduciaries from Georgia law governing the actions of
such fiduciaries, we find that the filing of the complaint in Evans County did not
violate the in terrorem clause. See Sinclair, supra at 504 (2) (holding that an “in
terrorem clause does not and cannot require forfeiture of [a beneficiary’s] interest if
he files [an] action for accounting and removal of [e]xecutor”) (emphasis supplied).
See also Snook v. Sessoms, 256 Ga. 482, 482 (350 SE2d 237) (1986) (holding that as
a matter of law, a beneficiary may file an action seeking to require a trustee to comply
with his fiduciary duties, without violating an the terrorem clause contained in the
trust documents); OCGA § 53-12-221 (a) (2) (“A trustee may be removed . . . [u]pon
petition to the court by any interested person showing good cause.”)
(b) Nor do we find that Bryant and Lee’s motion for injunctive relief, filed as
part of the Evans County action, constitutes a “legal or equitable challenge” to a
18 management decision of Callaway in administering the Trust or in managing the Trust
estate. And this motion in no way challenged the final distribution of the Trust estate.
While on its face the motion might appear to challenge a decision of Callaway
in administering the Trust or in managing Trust assets, the allegations contained in
that pleading make clear that such a challenge was not its purpose. Rather, that motion
alleged that Callaway was attempting to circumvent both the Evans County case and
the guardianship petition by liquidating certain Trust assets, even though he might not
be legally authorized to do so. Thus, the motion’s purpose was to attempt to maintain
the status quo pending the resolution of the questions presented by both the Evans
County action and the guardianship petition – i.e., pending a decision on whether the
Trust was valid and, if so, whether, given his conflict of interest, Callaway was the
proper trustee. We find that Lee’s and Bryant’s attempt to seek the maintenance of the
status quo pending the resolution of the main action did not violate the in terrorem
clause. As noted above, that action questioned both Callaway’s ethical and fiduciary
conduct in creating the Trust and in drafting the Trust documents, as well as his ability
to fulfill his fiduciary duties as trustee. In light of the relevant law, and given our
obligation to apply the in terrorem clause narrowly, we find that the filing of the
19 motion for injunctive relief did not violate that clause. See Sinclair, supra at 503-504
(2); Snook, supra at 482.
Given our finding that the filing of the Evans County complaint did not violate
the in terrorem clause, we need not decide whether Lee and Bryant’s voluntary
dismissal, entered before the trial court definitively ruled on any of the claims in the
amended and restated complaint, means that the brothers were unsuccessful with
respect to that complaint. For the same reason, we need not decide whether Lee and
Bryant were unsuccessful on their motion seeking injunctive relief in the Evans
County action.2
For the reasons set forth above, we affirm the orders of the trial court in Case
No. A12A0653, granting Lucinda’s motions for summary judgment against Callaway
and Lawrence, denying Lawrence’s motion for summary judgment as to Lucinda, and
entering final judgment in favor of Lucinda. We also affirm the order of the trial court
in Case No. A12A2323, denying Lawrence’s motion for summary judgment as to his
2 We again note, however, that there is some evidence in the record indicating that Lee and Bryant did have some success with respect to this motion. As explained earlier, although no ruling on this motion appears in the record, the evidence indicates that an order was entered requiring Callaway, at least under some circumstances, to obtain court approval before encumbering Trust assets.
20 claims against Bryant and Lee, and remand that case for further proceedings consistent
with this opinion.
Judgment affirmed in Case No. A12A0653. Judgment affirmed and case
remanded in Case No. A12A2323. Miller, P. J., and Ray, J., concur.