A Strong Offense
A Stronger Defense
Here’s an interesting case out of Missouri last week in which the court of appeals determined that the trial court flat out got the reasoning for its decision wrong, but nevertheless reached the correct result. In Banks v. Central Trust and Investment Co., a party alleged that he just “found” an amendment to a trust and asked the court to determine its validity. The trial court dismissed the case on the basis of judicial estoppel. The court of appeals determined that judicial estoppel didn’t apply, but the trial court was still correct in dismissing the case. Let’s see why.
Several years ago, John Banks, Susan Gaertner, and James P. Banks resolved a dispute over a revocable living trust executed by June C. Banks through a consent judgment signed by all the parties. At the time of the consent judgment, James P. Banks (who was at that time the trustee of the trust) warranted that there were no amendments to the trust.
A year later, James P. Banks filed an action to have the court determine the validity of a purported amendment to the trust he allegedly “found” after he signed the consent judgment. The trial court dismissed the action based on the doctrine of judicial estoppel. At a very high level, the doctrine of judicial estoppel prevents litigants from taking a position in one judicial proceeding and then taking a contrary position in a second proceeding. The court of appeals determined that the trial court got its reasoning wrong because judicial estoppel doesn’t apply when a party’s prior position (here, warranty that there were no amendments to the trust) was taken because of a good-faith mistake rather than as part of a scheme to mislead and manipulate the court (here, Banks claimed he was unaware of the existence of the amendment when he signed the consent judgment, and only discovered it later).
Yet, the trial court was still correct in dismissing the action. When we turn to where we should start in the first place – the trust instrument – we see that the grantor provided a clear, unambiguous path for amending the trust:
The settlor may at any time or times amend or revoke this agreement in whole or in part by instrument in writing (other than a will) delivered to the successor trustees or trustee. . . .
There was nothing in the pleadings indicating that the settlor made any attempt to deliver this “amendment.” In fact, Banks claimed that he found the amendment. If the terms of a trust provide for amendment, then the settlor may amend the trust only by substantially complying with the method provided in the terms of the trust. There was no allegation that such an effort was attempted by the settlor here, and, therefore, the trial court appropriately dismissed the action.