Penalty Clauses in Testaments: What Louisiana Can Learn from the Common Law

• Author: Irina Fox
• Position: Co-recipient of the Association Henri Capitant, Louisiana Chapter, Award for best paper on a civil law topic or a comparative law topic with an emphasis in the civil law.
• Pages: 1265-1302

The author would like to thank Professor Ronald Scalise and Mr. Randal Robert for their guidance and advice. ( Expressions in Pdf File).

Page 1265

With trepidation I approach the 'in terrorem' doctrine, because of the confusion of thought evidenced in the many reported cases and published discussions. ¹

I Introduction

During the last days of Bob's life, his mind showed significant deterioration. Abby, his assistant and bookkeeper, helped Bob update his will six days before he died. The amended testament assigned twenty-five percent of the estate to Abby-an addition that had not been included in the previous version of Bob's will. Bob signed the updated document in the presence of two witnesses, both of whom were related to Abby. After Bob's death, his only daughter, Debbie, initiated proceedings to attack the will, alleging undue influence. In response, Abby asked the court to enforce a special provision contained in the testament that read, "If any legatee under this Will in any manner whatsoever contests or attacks this Will, any bequest I have made to that person under this Will is revoked and shall be disposed of as if that contesting beneficiary had predeceased me."

The peculiar provision in Bob's will is a typical example of an in terrorem clause. These clauses, also called penalty, forfeiture, or no-contest clauses, are designed to prevent a legatee from contesting a will in court at the risk of forfeiture of his legacy. ² The Latin phrase "in terrorem" means "into fear." ³ Indeed, the clauses inflict fear not only upon the heirs but, as will be demonstrated, upon legal practitioners and courts as well. ⁴ The chief difficulty for the courts arises out of the need to balance the right of testators to Page 1266 freely dispose of their estate against the heirs' right to pursue their meritorious claims. ⁵ To make matters worse, testators can be extremely creative in their phraseology of penalty clauses. ⁶ The judicial analysis necessarily depends on the language of the clause itself and the circumstances surrounding the contest, which makes the courts' task even more arduous. ⁷

The difficulty in balancing the rights of testators and the rights of heirs is exacerbated in Louisiana. Few cases involving penalty clauses arose during the twentieth century, leaving Louisiana courts without the opportunity to develop a systematic approach to analyzing penalty clauses. ⁸ Changes in Louisiana successions law have increased the likelihood that testators will resort to such clauses and that litigation regarding them will ensue. Due to the virtual abolition of forced heirship, a testator has more freedom in Page 1267 determining how to dispose of his estate. ⁹ This increased freedom may prompt testators to resort to penalty provisions as a guarantee that their wills are enforced. ¹⁰ With limited exceptions, the estate is now "freely alienable," which allows testators to be creative in their bequests. ¹¹ At the same time, descendants of testators who are left out of the will are more likely to file suit challenging the will because, save in rare circumstances, they are no longer entitled to a portion of the testator's estate by law.

This likely increase in the use and litigation of penalty clauses necessitates the clarity that this Comment strives to provide by proposing a framework for analyzing penalty clauses in Louisiana. Part II presents the background of penalty provisions in Roman and French history. Part III reviews and summarizes the trends in more than one hundred years of Louisiana jurisprudence, while at the same time identifying the gaps in courts' analysis. Part IV examines the history and modern common law in search of the solution for Louisiana's problems. Part V establishes a flexible framework for analyzing penalty provisions in Louisiana that combines Louisiana's civil law heritage with the equitable common law approach. Part VI offers a brief conclusion.

II Background

The statutory authority for analyzing penalty clauses in Louisiana is Louisiana Civil Code article 1519, which provides that "[i]n all dispositions inter vivos and mortis causa impossible conditions, those which are contrary to the laws or to morals, are reputed not written." ¹² Louisiana jurisprudence has used French Page 1268 law as a framework for determining the validity of the underlying disposition, which in turn finds its roots in Roman law. ¹³ Thus, a brief examination of the law in those jurisdictions is required.

A Roman Law: The Birth of the Modern Civil Law Approach

Most civilian legal systems contain a statute similar to Louisiana's article 1519. ¹⁴ This general civil law principle dates back to Roman law. ¹⁵ The practice of considering illicit and immoral conditions not written might have been caused by the desire to preserve the testament despite the failure of a condition Page 1269 because "the Romans dreaded dying intestate." ¹⁶ The Romans resorted to various measures to ensure that a testament would be preserved despite the annulment of a condition. ¹⁷ For instance, if the legatee took an oath to abide by the condition imposed by the testator, the praetor could grant the legatee a release from such an oath if the condition was illicit or immoral. ¹⁸ Another solution was to regard the impossible conditions as "inadvertent," implying that the testator would not have purposely added a condition that might cause his intestacy. ¹⁹

Although there is no consensus as to the consequence the Romans attached to impossible or immoral conditions, two schools of thought can be identified: Proculians and Sabinians. ²⁰ One of the differences in methodology employed by the two schools is related to textual interpretation. ²¹ In reviewing contracts and wills, Proculians "advocated a strict, objective interpretation of the words used, whatever may have been the intention of the author of the text and often without regard to the consequences." ²² Proculians looked at "the objective agreement of the parties, as expressed in the formulation of the contract." ²³ Following the rule applicable to contracts, Proculians would annul the whole legacy if the condition contained therein was determined to be contrary to the law or public policy. ²⁴ On the other hand, Sabinians "favored a looser and less rigid approach to the interpretation of texts." ²⁵ In interpreting Page 1270 wills, Sabinians were concerned with ascertaining the intent of the testator, without dwelling on the objective meaning of the will's language. ²⁶ Thus, Sabinians are considered to be the founders of the modern-day civilian approach of preserving the legacy as a whole after striking down the illicit or immoral condition. ²⁷

B French Law: Focus on the Underlying Disposition

The Sabinian approach has been carried on in France, where penalty clauses ordinarily are regarded as valid, and their enforcement results in the heir forfeiting his bequest. ²⁸ The validity and enforceability of a particular penalty clause hinge upon the success of the heir's contest of the underlying disposition. ²⁹ If the contestant fails to show that the disposition is illegal or immoral, the penalty clause becomes enforceable, and the heir will forfeit the bequest. ³⁰ On the other hand, if the contestant succeeds in demonstrating that the disposition is contrary to the law or good morals, the penalty clause will be deemed unwritten, and the contestant will not be punished. ³¹ The contestant is not allowed any leeway for challenging the will in good faith. ³² As justification for this unsympathetic approach, French commentators note that "there is nothing more worthy than the wish of the testator to prevent wrangling in the courts among his heirs" and that strict enforcement of penalty provisions is bound to make the heirs think twice before attacking the will. ³³ Nonetheless, the harshness of this approach is apparent, for "no one can be sure that a disposition is actually against law or morals until the court has decided the point." ³⁴ Page 1271

In their analysis, French courts distinguish between private and public interests as reasons for will contests. ³⁵ A private interest reflects merely pecuniary considerations of the heir. ³⁶ If a will contains no dispositions contrary to the law or good morals, the will is only "susceptible to attack for causes of private interests." ³⁷The contesting beneficiary will be penalized even though the judicial action brought by him merely requests an interpretation of the testament. ³⁸ Further, if the lawsuit results in the court declaring the disposition null, the penalty will nonetheless be imposed on the beneficiary who brought the lawsuit. ³⁹ However, French courts treat the heir more generously when the penalty provision appears ambiguous. ⁴⁰ In those cases, "the tendency is to apply it mildly or not at all." ⁴¹ In sum, if the heir contests the will out of private or pecuniary...