In Re the Shaheen Trust ( 2015 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
IN RE THE SHAHEEN TRUST U/A 1/12/1994,
AS RESTATED 7/21/2000
No. 2 CA-CV 2014-0109
Filed January 16, 2015
Appeal from the Superior Court in Pima County
No. PB20090213
The Honorable Kyle Bryson, Judge
REVERSED IN PART AND REMANDED
COUNSEL
Munger Chadwick, P.L.C., Tucson
By Thomas A. Denker
Counsel for Appellant Twinkle Shaheen
Catherine Roberts, Jacksonville, Florida
George Roberts, Dunnellon, Florida
In Propria Personae
OPINION
Chief Judge Eckerstrom authored the opinion of the Court, in which
Judge Espinosa and Judge Kelly concurred.
E C K E R S T R O M, Chief Judge:
¶1 Twinkle Shaheen appeals from the trial court’s
judgment refusing to apply a forfeiture provision of the Shaheen
IN RE SHAHEEN TRUST
Opinion of the Court
Trust against Catherine “Pearl” Roberts and her son, George Roberts
(collectively “the Robertses”), after they alleged breach of trust
against Shaheen. For the following reasons, we reverse in part and
remand.
Factual and Procedural Background
¶2 The Shaheen Trust was established in 1994, with
Shaheen as the trustee. The trust included a no-contest provision,
stating:
If any beneficiary under this Trust, in
any manner, directly or indirectly, contests
or attacks the validity of either Settlor’s
Will, this Trust or any disposition under
either, by filing suit against . . . Trustee . . .
then any share or interest given to that
beneficiary under the provisions of this
Trust is hereby revoked and shall be
disposed of in the same manner as if that
contesting beneficiary and all descendants
of that beneficiary had predeceased the
Surviving Settlor.
The Robertses, both beneficiaries of the trust, filed a petition alleging
multiple claims of breach of trust. Shaheen filed a counter-petition
seeking an award of fees and forfeiture of beneficial interest. The
trial court denied all of the Robertses’ claims.1 The court awarded
Shaheen her costs and attorney fees, but denied her request to
declare the Robertses’ interests in the trust forfeited. Shaheen
1 Because the Robertses have not appealed the trial court’s
denial of their claims, we do not address their arguments
challenging that ruling. See Ariz. R. Civ. App. P. 13 bar committee
note (“Absent a cross-appeal, the appellate court may not alter the
lower court’s judgment in a manner favorable to the appellee.”);
Engel v. Landman, 221 Ariz. 504, ¶ 17, 212 P.3d 842, 847 (App. 2009).
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IN RE SHAHEEN TRUST
Opinion of the Court
challenges the latter ruling on appeal. We have jurisdiction
pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).2
Forfeiture of Interest
¶3 The trial court found that “the Petition in this case is an
attack on the validity of a disposition under the Trust in violation of
[the no-contest] provision,” but also found the forfeiture of interest
provision unenforceable under In re Estate of Shumway, 198 Ariz. 323,
9 P.3d 1062 (2000). Whether an in terrorem or no-contest clause is
enforceable is an issue of law, which we review de novo. In re Estate
of Stewart, 230 Ariz. 480, ¶ 13, 286 P.3d 1089, 1093 (App. 2012).
¶4 Shaheen contends that, because A.R.S. § 14-2517 refers
only to wills, and not to trusts, no-contest provisions in trusts are
valid and enforceable regardless of whether probable cause existed
to bring a challenge. The trial court, in relying on Shumway, noted
that case involved a will, not a trust. 198 Ariz. 323, ¶ 1, 9 P.3d at
1063-64. Nevertheless, the court stated there was “no reason to
apply a different standard in the context of other donative
transfers.” But Shumway, which invalidated no-contest provisions of
wills in cases where probable cause existed to bring the challenge,
interpreted and applied § 14-2517. 198 Ariz. 323, ¶ 1, 9 P.3d at 1063-
64. And in Stewart, this court concluded § 14-2517 applies only to
wills, and not to trusts. 230 Ariz. 480, n.4, 286 P.3d at 1093 n.4.
2The Robertses argue that we should dismiss this case because
Shaheen failed to comply with Rule 13(a)(3), Ariz. R. Civ. App. P.,
which requires an opening brief to “indicat[e] briefly the basis of the
appellate court’s jurisdiction.” Although Shaheen did not
specifically cite §§ 12-120.21 and 12-2101, she explained that she was
appealing from a judgment of the superior court, which we believe
is sufficient. See Associated Aviation Underwriters v. Wood, 209 Ariz.
137, ¶ 147, 98 P.3d 572, 614 (App. 2004) (noting disfavor of
hypertechnical arguments and preference for disposing of cases on
merits); see also Ghadimi v. Soraya, 230 Ariz. 621, ¶ 7, 285 P.3d 969, 970
(App. 2012) (court of appeals has “independent duty to examine
whether we have jurisdiction over matters on appeal”).
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IN RE SHAHEEN TRUST
Opinion of the Court
¶5 Because § 14-2517 does not apply to trusts, there is no
statutory authority concerning the question of whether a no-contest
provision in a trust is enforceable when probable cause existed to
bring a challenge. And because Shumway applied and interpreted
§ 14-2517, it is likewise inapplicable.
¶6 Arizona courts will apply the Restatement in the
absence of contrary authority, In re Herbst, 206 Ariz. 214, ¶ 17, 76
P.3d 888, 891 (App. 2003), and, as the trial court noted, the
Restatement (Second) of Property (Donative Transfers) § 9.1 cmt. l
(1983) suggests treating no-contest provisions in wills and trusts the
same. Although Stewart concluded that § 14-2517 does not apply to
trusts, it did not conclude that no-contest provisions in trusts are
enforceable without regard to probable cause; indeed, it suggested
exactly the opposite. 230 Ariz. 480, ¶ 1, n.4, 286 P.3d at 1091, 1093
n.4. In short, although no-contest provisions in wills are governed
by statute, and no-contest provisions in trusts are governed by the
Restatement, the standard for evaluating the enforceability of such
clauses does not differ between wills and trusts. Accordingly, we
find the trial court did not err in applying Shumway and concluding
that the no-contest provision would be invalid if the Robertses had
probable cause to bring their petition.
Probable Cause
¶7 Shaheen next claims the trial court erred in finding the
Robertses had probable cause to bring the petition. We defer to a
trial court’s determination of the factual basis underlying a claim;
however, whether probable cause existed in a particular case is
ultimately a question of law, which we review de novo. Shumway,
198 Ariz. 323, ¶ 9, 9 P.3d at 1065. Shaheen suggests that, to avoid
forfeiture, there must have been probable cause for each of the
Robertses’ nine claims. We agree.
¶8 We have found no authority governing this issue. But,
for the following reasons, we conclude that when a single petition
alleges multiple challenges to a will or trust, and the challenges are
brought in contravention of a no-contest provision, probable cause
must exist as to each challenge.
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IN RE SHAHEEN TRUST
Opinion of the Court
¶9 The text of the Restatement explains that no-contest
clauses are enforceable unless probable cause supports a “contest.”
Restatement § 9.1. Black’s Law Dictionary defines the verb “contest”
as “[t]o litigate or call into question; challenge.” 386 (10th ed. 2014).
When a party brings nine claims against a trustee, as the Robertses
have done here, that party litigates nine different challenges, and,
accordingly, contests nine separate claims. If these nine claims had
been presented in nine separate petitions, there would be no
question that probable cause would have to support each claim to
avoid forfeiture. We see no reason for a different result merely
because the claims were asserted in a single petition.
¶10 In enforcing no-contest clauses in the context of wills,
except where probable cause exists to bring a challenge, our
supreme court has balanced important public policy concerns.
“Public policy reasons to support penalty clauses include preserving
the transferor’s donative intent, avoiding waste of the estate in
litigation, and avoiding use of a will contest to coerce a more
favorable settlement to a dissatisfied beneficiary.” Shumway, 198
Ariz. 323, ¶ 7, 9 P.3d at 1065. Litigating nine separate claims is
necessarily more costly than litigating a single claim. Clearly, if a
petition asserts one claim that is supported by probable cause and
eight claims that are not, that petition will result in greater expense
to the trust than the litigation of a single claim. Furthermore, if
probable cause for a single claim protected a party from
disinheritance under a no-contest clause, that party could file a
petition with one legitimate claim and any number of frivolous
claims, thereby using the threat of extensive litigation to “coerce a
more favorable settlement.” Id.
¶11 The public policy reasons for supporting enforcement of
no-contest provisions must be balanced against the importance of
allowing parties to prove a donative transfer is genuinely invalid.
Id. But requiring probable cause for each challenge raised in a single
petition does nothing to harm that interest. It merely ensures that
parties will carefully consider each challenge they might raise before
filing a petition and instituting costly litigation.
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IN RE SHAHEEN TRUST
Opinion of the Court
¶12 Because we conclude probable cause must support each
individual challenge brought to a donative transfer, if any of the
Robertses’ claims was not supported by probable cause, the trial
court erred in refusing to declare their interests in the trust forfeited.
Probable cause, in this context, is defined as “the existence, at the
time of the initiation of the proceeding, of evidence which would lead a
reasonable person, properly informed and advised, to conclude that there
is a substantial likelihood that the contest or attack will be successful.” Id.
¶ 12, quoting Restatement § 9.1 cmt. j (emphasis in Shumway).
Subjective belief that the claims are likely to succeed, while required,
is not sufficient; the petitioner’s subjective belief must be objectively
reasonable. Id. ¶ 13; cf. Bradshaw v. State Farm Mut. Auto. Ins. Co., 157
Ariz. 411, 417, 758 P.2d 1313, 1319 (1988) (discussing analogous test
for malicious prosecution).
¶13 One of the claims brought by the Robertses was that
Shaheen was required to make yearly, rather than monthly,
distributions to herself.3 The trial court found that the claim had no
merit, noting the “trust instrument itself does not provide for such a
requirement.” The court further found that the Robertses had not
cited any legal authority or presented any credible evidence to
support the position. The court stated that the Robertses “had a
reasonable subjective belief in the likelihood of the validity of their
claims, based on the information they had at the time they filed the
petition,” but did not explain what that information was. Nor did
the court explain how that information made their claim reasonable
despite the absence of supportive language in the trust document,
legal authority, or other credible evidence. The Robertses have not
pointed to, nor have we found, anything in the record that would
show this claim was objectively reasonable. We therefore must
conclude the court erred when it found the Robertses’ claims were
3 The Robertses’ petition contained “a multitude of
allegations,” which the trial court “distilled into nine separate claims
of breach of trust.” They have not contested on appeal the court’s
characterization of their claims.
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IN RE SHAHEEN TRUST
Opinion of the Court
supported by probable cause and refused to enforce the forfeiture
provision of the Shaheen Trust against them.
Disposition
¶14 For the foregoing reasons, the portion of the judgment
declining to enforce the no-contest provision of the Shaheen Trust is
reversed. We remand this case to the trial court for entry of an order
of forfeiture against the Robertses.
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