In breach-of-trust litigation where adequacy of fiduciary disclosure is in question, the trustee’s motion for summary judgment ought to fall on deaf ears

Assume trustee of an irrevocable inter vivos trust leases entrusted land to an entity that employs the trustee. All rents properly accrue to the trust estate. The beneficiaries assert, however, that the trustee may have engaged in unauthorized self-dealing in violation of the trustee’s fiduciary duty of loyalty. They move to discover any information regarding the inner workings of the entity that may be relevant to the transaction and are prepared to execute an appropriate confidentiality agreement. They particularly have in mind the entity’s tax returns, balance sheets, QuickBooks files, and profit-and-loss statements. The trustee opposes the discovery motion. The trustee counters with a motion for summary judgment, which the trial court grants. Call this the summary judgment Catch-22. The beneficiaries appeal. This was the gist of the fact pattern in Matter of Potter Exemption Trust, 2025 WL 2910424 (Supreme Court of Montana). The appellate court quite rightly disagreed with the trial court’s granting of summary judgment as adequacy of fiduciary disclosure was in question. “…[W]e cannot read the…[trustee’s]…duty to inform and report so narrowly as to require a beneficiary to prove a breach of trust before being entitled to information reasonably necessary to prevent a breach of trust, because that would render the beneficiary’s right to information…meaningless.”

By way of background, it is classic equity doctrine that if a trustee self-deals in violation of the duty of loyalty, such as by purchasing for his own account an entrusted asset, the transaction is voidable per se at the petition of the beneficiaries. There would be no need for them to ascertain the inner workings of the other party to the transaction, to delve into the transaction’s particular facts and circumstances, or to prove unfairness and/or bad faith on the part of the trustee vis a vis the beneficiaries. They need only prove that the transaction (1) involved some type of self-dealing on the part of the trustee and (2) had not been authorized by the trust’s terms. This is known as the no-further-inquiry rule. See generally §6.1.3 of Loring and Rounds: A Trustee’s Handbook (2026), the relevant portion of which section is set forth in the appendix below.

Cross reference. For another example of judicial Catch-22, see Sanford v. Vinal, 28 Mass. App. Ct. 476 (1990), a dispute between the developer of a tract of land and a descendant of persons interred somewhere in a long-neglected portion of the tract, though the developer’s experts had not a clue which part. The portion had been dedicated via deed as a burial ground circa 1707. The plaintiff-descendant’s own experts were denied access to the tract for purposes of ascertaining, if possible, the boundaries of the ancient burial ground, though the investigation would have been non-invasive and at her expense. See Rounds, Protections Afforded to Massachusetts’ Ancient Burial Grounds, 73 Mass. L. Rev. 176 (1988), footnote 55 and accompanying text (https://www.jdsupra.com/legalnews/protections-afforded-to-massachusetts- 2 a-39668/0). The plaintiff-descendant having failed to prove the boundaries of the burial ground, the developer was granted summary judgment and allowed to proceed with his project. The Massachusetts appellate court affirmed the judgment of the trial court dismissing the plaintiffdescendant’s litigation complaint for want of standing.