Relatives Who Arranged For Trust Are Sued for Interference

OCTOBER 12, 1998 VOLUME 6, NUMBER 15

James Graham and Louise Loehr made an unusual deal in 1987. The two Missouri residents agreed that Graham would move in with Loehr, be introduced as her “man” or “man friend,” and act as both her real estate agent and personal companion. In return, Loehr would agree to leave her house to Graham if she died before him, and also give him “several million” dollars to provide for his care after her death. In 1988, the couple reduced their agreement to writing.

Apparently, Ms. Loehr’s relatives did not approve. One of them took her to visit his lawyer in early 1989. After consulting with the lawyer, Ms. Loehr signed a living trust and transferred most of her assets into the trust’s name. She also signed a new will, which left her entire estate to the trust. The trust itself made no provision for Mr. Graham.

Six years later, Ms. Loehr died. Shortly after her death her relatives removed all of Mr. Graham’s personal effects from the home; when he objected, his property was returned to him, but his copy of the agreement with Ms. Loehr was not.

Ms. Loehr’s family instituted a probate proceeding, seeking to admit the will prepared in 1989. Filings with the court indicated that her probate estate would amount to about $80,000; the bulk of her estate, somewhere in the range of $10,000,000 in total value, would be controlled by the living trust she had signed.

Mr. Graham determined that it was pointless to object to the probate, since neither the residence nor the “several million dollars” he claimed he had been promised would be part of the probate proceeding. Instead, he brought a separate lawsuit against Ms. Loehr’s four relatives.

Mr. Graham’s lawsuit alleged that Ms. Loehr’s relatives had intentionally interfered with his expectancy under the contract he had made with Ms. Loehr. He did not ask the court to enforce the contract itself, but instead sought $15,000 for actual damages and $5 million in punitive damages from each of the four defendants.

Ms. Loehr’s relatives asked the trial judge to dismiss the lawsuit. They insisted that Mr. Graham should first seek his relief in probate court. The trial court agreed, and the lawsuit was dismissed.

Missouri’s Court of Appeals reversed the trial judge’s holding. If Mr. Graham had filed a probate court action, the judges noted, there would have been insufficient assets to satisfy his claim. Although a contract must ordinarily be enforced against an estate rather than its beneficiaries, Mr. Graham’s claim could properly be made against the four relatives who he alleges induced Ms. Loehr to circumvent their agreement. Graham v. Manche, June 16, 1998.

It is important to understand that the Court of Appeals’ ruling in Graham v. Manche did not uphold the contract itself. The judges simply decided that Mr. Graham should be given a chance to prove that there was an agreement, and that Mrs. Loehr’s relatives intentionally acted to disrupt that agreement. By setting the matter for a trial, the decision gives Mr. Graham his day in court.

Arizona law on the claim of intentional interference with an expectancy is not yet clear. Only a handful of states have permitted actions outside the probate court in similar circumstances, and Arizona courts have not yet joined them. Most often, the actions are brought when there is some good reason that a probate proceeding will not right an alleged wrong. With the extraordinary growth in recent years in use of living trusts and other probate-avoidance techniques, it is not difficult to imagine that there will be a related growth in claims like those made by Mr. Graham. Often these claims will be the only way to impose the structure of probate proceedings on non-probate transfers.

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