A recent Arizona Court of Appeals memorandum decision provides useful insight into the application of no-contest clauses in trusts—especially where co-trustees and beneficiary-trustees are involved. In Champagne v. Bozer, the appellate court affirmed the superior court’s dismissal of a counter-petition and denial of leave to amend to assert a claim to invoke a no contest clause and disinherit a beneficiary.
Facts & Procedural Posture
• Trustor Rick Champagne created the “Rick Champagne Revocable Trust U/A/D February 21, 2005, as Restated and Amended” (the “Trust”).
• The Trust contains a no-contest clause.
• The Trust names as successor co-trustees: the Trust’s beneficiary daughter Amanda Champagne, and two others: Jay Douglas Wiley II (“Wiley”) and Christopher Bozer (“Bozer”). The Trust further appoints Wiley and Bozer as co-trustees for the Trust’s controlling interest in Champagne Holdings, LLC.
• After Rick’s death, Wiley and Bozer (as co-trustees) authorized the sale of the Trust’s interest in Champagne Holdings to Bozer and a third party.
• Amanda, in her capacity as co-trustee and beneficiary, filed a petition in probate court alleging that Wiley and Bozer breached fiduciary duties by selling the Trust’s interest in Champagne Holdings without disclosure and for significantly less than fair market value; she sought to remove Wiley and Bozer as co-trustees, appoint a successor special trustee, and void the sale.
• In response, Wiley filed a counter-petition (Count One) alleging that Amanda’s filing triggered the no-contest clause—and that as a result her beneficial interest in the Trust was terminated.
• Amanda moved to dismiss Count One for failure to state a claim; the superior court granted the motion, dismissed the count, denied Wiley leave to amend, and entered judgment. On appeal, the Arizona Court of Appeals affirmed.
Legal Issues & Analysis
1. Application of No-Contest Clause
The core question: did Amanda’s petition—filed in her capacity as co-trustee and beneficiary—violate the Trust’s no-contest clause, thereby triggering the clause and terminating her beneficial interest?
The Court laid out the controlling rule: when interpreting a no-contest clause one must look to the text of the trust in context to ascertain the trustor’s intent.
The clause in the Trust states (in relevant part):
If any person in any manner, directly or indirectly . . . , contests or attacks this instrument or any of its provisions or seeks to impair or invalidate any part or provision of the Trustor’s estate plan, any share or interest given to that contesting person under this trust is revoked and shall be disposed of in the same manner provided as if that contesting person had predeceased the date of this instrument without leaving issue surviving him. . . . [T]he words “contest”, “attack”, “impair”, and “invalidate” include but are not limited to any claim asserted against this trust, the will of the Trustor, the estate of the Trustor, the
estate plan of the Trustor, or any assets encompassed by Trustor’s estate plan.
In applying that language, the Court held that Amanda’s petition did not sufficiently allege that she had contested, attacked, impaired or invalidated the Trust instrument, Rick’s will or estate plan, or the Trust’s assets. Rather, she brought claims against the trustees for breach of fiduciary duty in their capacity as trustees.
Thus, the Court concluded that Wiley’s counter-petition failed as a matter of law: the allegations did not state a claim that Amanda had run afoul of the no-contest clause.
2. Denial of Leave to Amend
The second issue: whether the superior court abused its discretion in denying Wiley’s request to amend his counter-petition. The Court applied the standard that denial of leave to amend is reviewed for abuse of discretion.
Wiley failed to file a separate motion to amend and did not attach a proposed amended pleading as required by Arizona Rule of Civil Procedure. He only proffered an amended version in briefing after the court had already dismissed Count One. The Court held that the superior court did not err in denying the amendment.
Practical Takeaways for Arizona Trust Litigation
For probate and trust practitioners in Arizona—especially litigators—this decision offers several useful guide-posts:
- Co-trustee as Beneficiary: The scenario where a beneficiary also serves as trustee (or co-trustee) raises layered issues. Here, the Court emphasized that the trustee/beneficiary’s actions were assessed under the no-contest clause as a beneficiary, not automatically as a “contesting person,” because the actions alleged were fiduciary-duty claims rather than attacks on the trust instrument itself.
- No-Contest Clause Scope: Carefully examine the language of the clause. Does it specify “contest, attack, impair or invalidate” any part of the estate plan or instrument? Here the Court found that fiduciary-duty claims against trustees did not constitute a contest of the instrument under the clause’s language. This underscores the importance of how broadly (or narrowly) the clause is drafted.
- Pleading Standards: Even when invoking a no-contest clause, the claimant must plead sufficient factual allegations to show the defendant undertook one of the prohibited actions under the clause (contest, attack, impair, invalidate). Merely saying that a beneficiary brought a petition is not enough—especially when the petition is styled as a fiduciary-duty claim.
- Amendment Practice: When seeking leave to amend, especially in Arizona probate and trust litigation, make sure to follow rule requirements (motion, proposed amendment, timely filing). Failure to do so may preclude an opportunity to correct deficiencies post-dismissal.
- Strategic Trustee–Beneficiary Dynamics: When a beneficiary brings suit in their capacity as trustee or co-trustee, the lines between fiduciary claims and trust-instrument claims can blur. Litigators should anticipate potential arguments about whether the petition constitutes an attack on the instrument or is instead a trustee fiduciary claim.
Conclusion
Champagne v. Bozer is a solid decision for Arizona trust litigation practitioners. It underscores that no-contest clauses are not automatically triggered merely because a beneficiary/trustee files suit; the specific conduct must fall within the clause’s prohibited actions as drafted. It also serves as a procedural caution regarding amendment of pleadings.
If you are facing a trust dispute, concerned about a no-contest clause, or unsure whether you can challenge a trustee’s actions without risking your inheritance, we can help. Our firm specializes in probate, trust, and estate litigation, and we have extensive experience handling complex high stakes no-contest clause conflicts.
Contact Berk Law Group today to discuss your situation with an experienced Arizona probate litigator. We’ll help you understand your rights, evaluate your options, and protect your interests.
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