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In re Eleanor McCarthy Lenahan Trust

Court of Appeals of South Carolina

October 30, 2019

In Re: Eleanor McCarthy Lenahan Trust under agreement Dated July 12, 2001.
v.
Mary Kathleen Lenahan, individually and in her capacity as Trustee of the Art. X(35)MKL Trust Share UAD 071201, Jean Marie Qualliu, Joan Eleanor DeMaio, and Christine Ann Lenahan, Defendants, Kathleen Suzanne Heslin and Maureen Theresa Moseley, in their capacities as Co-trustees of the Eleanor McCarthy Lenahan Trust under agreement dated July 12, 2001, Appellants, Of Whom Mary Kathleen Lenahan and Jean Marie Qualliu are Respondents. Appellate Case No. 2017-000882

          Submitted June 3, 2019

          Appeal From Beaufort County Carmen T. Mullen, Circuit Court Judge.

          Douglas S. Delaney, of Delaney Law Firm, PA, of Bluffton, and Sean Michael Bolchoz, of Bolchoz Law Firm, PA, of Hilton Head Island, both for Appellants.

          Kelly MacPherson Jolley and Ariail Burnside Kirk, both of Jolley Law Group, LLC, of Columbia, for Respondents.

          HILL, J.

         This appeal turns on whether a trust beneficiary's filing of a complaint with the South Carolina Office of Disciplinary Counsel (ODC) against a lawyer for the trustees of the trust triggers (1) the no-contest clause in the trust and (2) a hold harmless and indemnity clause contained in a settlement agreement arising out of a dispute over administration of the trust. We conclude that under the circumstances here it does not and affirm the ruling of the trial court.

         I.

         Eleanor McCarthy Lenahan (Settlor) set up a revocable trust in 2001. In 2012, she amended the trust and included a "no-contest" clause that states in part:

If any beneficiary under this Trust Agreement, singly or in conjunction with any other person or persons, directly or indirectly, (i) contests in any court the validity of this Trust Agreement or, in any manner, attacks or seeks to impair or invalidate any of its provisions; . . .; (iv) objects in any manner to any action taken or proposed to be taken in good faith by the Trustee; [or] (v) objects to any construction or interpretation of this Trust Agreement, or any provision of it, that is adopted or is proposed in good faith by the acting Trustee . . . that person's right to take any interest given to him or her by or under this Trust Agreement shall be determined as it would have been determined if the person had predeceased the execution of this instrument without surviving issue.

         Settlor named two of her daughters, Kathleen Suzanne Heslin and Maureen Teresa Mosley (the Trustees), to succeed her as trustee in the event of her death. Settlor died later in 2012. The trust called for the trust estate to be distributed to Settlor's surviving children, first by way of specific cash distributions to each child and the remainder to each surviving child in equal shares.

         After Settlor's death, two of her other daughters, Mary Kathleen Lenahan and Jean Marie Qualliu (the Beneficiaries), began objecting to the Trustees' actions in administering the trust. In an effort to resolve these issues, the parties entered into a private agreement (the Settlement Agreement) containing the following indemnity and hold harmless clause:

In the event that [one of the Trustees] or the [trust] in any capacity is a party, or is threatened to be made a party, to any action, claim, suit or proceeding, the [Beneficiaries] are hereby obligated to fully and entirely indemnify and hold harmless the [Trustees] and [the trust] from any and all costs, expenses and all attorney fees incurred by the [Trustees] and the [trust] with respect to such action, claim, suit or proceeding.

         Shortly after executing the Settlement Agreement, the Beneficiaries sent letters of complaint to the ODC accusing the Trustees' lawyer of misconduct. In response, the Trustees brought this action for declaratory judgment and breach of contract, alleging the Beneficiaries' ODC complaint violated the no-contest clause of the trust and the "proceeding" initiated by the Beneficiaries in the ODC constituted a breach of the Settlement Agreement, entitling the Trustees to indemnity. The trial court granted partial summary judgment to the Beneficiaries, finding the ODC complaint did not constitute a contest of the trust because the ODC had no jurisdiction over trust contests or non-attorneys, complaints to the ODC were privileged, and complainants were immune from civil suit pursuant to Lawyer Disciplinary Enforcement Rule 13. The trial court further found probable cause existed for the contest and ...


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