In Re Indenture of Trust Dated January 13, 1964 ( 2014 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION TWO
IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964.
MILTON J. WEINSTEIN,
Petitioner/Appellant/Cross-Appellee,
v.
STEVEN WEINSTEIN AND CARRIE LEE ROSEN,
Respondents/Appellees/Cross-Appellants.
No. 2 CA-CV 2013-0117
Filed May 16, 2014
Appeal from the Superior Court in Pima County
No. PB20120951
The Honorable Jan E. Kearney, Judge
The Honorable Leslie Miller, Judge
AFFIRMED
COUNSEL
Munger Chadwick, P.L.C., Tucson
By Mark E. Chadwick
Counsel for Petitioner/Appellant/Cross-Appellee
Lawrence E. Condit, Tucson
Counsel for Respondents/Appellees/Cross-Appellants
OPINION
Chief Judge Howard authored the opinion of the Court, in which
Presiding Judge Vásquez and Judge Miller concurred.
IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
H O W A R D, Chief Judge:
¶1 Milton Weinstein appeals from the trial court’s grant of
summary judgment in favor of Steven Weinstein and Carrie Rosen
(the “Weinsteins”), interested persons as trustee and beneficiary
respectively, of an inter vivos trust their grandparents established in
1964 (the “Trust”), on the basis that he lacked standing to file a
petition for an accounting of the Trust. Milton argues the court
erred in finding he lacked standing because the agreement
purporting to assign his entire beneficial interest in the Trust was
invalid, and, alternatively, he re-inherited an interest in the Trust
through his father’s will. Milton also argues the court abused its
discretion in awarding the Weinsteins their attorney fees. The
Weinsteins cross-appeal, arguing the court erred in awarding less
than the full amount of fees they had requested. Because we find
that Milton lacked standing, and the trial court did not abuse its
discretion in determining the attorney fee award, we affirm.
Factual and Procedural Background
¶2 On appeal from a grant of summary judgment, we
view the facts in the light most favorable to the opposing party.
Wells Fargo Bank, N.A. v. Allen, 231 Ariz. 209, ¶ 14, 292 P.3d 195, 199
(App. 2012). In 1964, Harry and Alice Weinstein created an inter
vivos trust, and named their three grandchildren, Steven, Carrie,
and Milton Weinstein, as the beneficiaries. Bernard Weinstein,
father of Steven, Carrie, and Milton, was named trustee. The Trust
contained a spendthrift provision prohibiting the voluntary and
involuntary transfer of a beneficiary’s interest. Pursuant to several
amendments over the years, the Trust was modified to terminate
upon Bernard’s death.
¶3 In 2000, Milton executed an assignment, purporting to
assign his entire interest in the Trust to his siblings, Steven and
Carrie, to be held in trust for the benefit of Steven and Carrie’s
children. In return for the assignment, the trustee paid Milton
$75,000 from the Trust, which was distributed over three years.
Bernard passed away in May 2010.
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
¶4 In September 2012, Milton brought a petition for
accounting against the Trust and requested the court freeze all Trust
assets and grant him a surcharge. The Weinsteins objected to the
petition and then filed a motion for summary judgment. The
Weinsteins argued that Milton had no standing to file the petition
for accounting because he was no longer a beneficiary of the Trust
following the assignment in 2000, and that laches and the statute of
limitations barred any claims attempting to invalidate the
assignment. The trial court granted the Weinsteins’ motion, finding
that the assignment was valid, that Milton did not re-inherit an
interest in the Trust through Bernard’s will, and that even if the
assignment was invalid, laches and the statute of limitations
prohibited Milton’s claims. The court also awarded the Weinsteins a
portion of their attorney fees pursuant to A.R.S. § 14-11004(B). We
have jurisdiction over Milton’s appeal and the Weinsteins’ cross-
appeal pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(9).
Summary Judgment
¶5 Milton argues the trial court erred in concluding that he
had assigned any interest he had in the Trust in 2000 and therefore
lacked standing to bring a petition for accounting against the Trust.
Whether a party has standing is an issue of law we review de novo.
In re Estate of Stewart, 230 Ariz. 480, ¶ 8, 286 P.3d 1089, 1092 (App.
2012). The Arizona Trust Code specifies that a court may intervene
in the administration of a trust only when an action is brought by an
“interested person.” A.R.S. § 14-10201(A). An “interested person”
in Title 14 proceedings is defined, as relevant here, as any
“beneficiary . . . [or] other person who has a property right in or
claim against a trust estate.” A.R.S. § 14-1201(28).
¶6 Milton first argues the assignment of his interest was
invalid, thus maintaining his status as a beneficiary of the Trust,
because the Trust’s spendthrift provision prohibited the assignment.
To determine whether Milton has standing to petition for an
accounting, we therefore must first examine the language of the
Trust and determine whether Milton effectively assigned any
interest he had in the Trust, or whether he remained a beneficiary
despite the purported assignment.
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
¶7 We review the interpretation of a written instrument de
novo. See Squaw Peak Cmty. Covenant Church of Phx. v. Anozira Dev.,
Inc., 149 Ariz. 409, 412, 719 P.2d 295, 298 (App. 1986). When
interpreting a trust, the overriding goal is to ascertain the intent of
the trustor. In re Estate of Zilles, 219 Ariz. 527, ¶ 8, 200 P.3d 1024,
1027 (App. 2008). That intent “‘is to be ascertained from the contents
within the four corners of the instrument, including the general plan
or scheme thereof, and when necessary or appropriate, the
circumstances under which the [instrument] was made.’” Id.,
quoting In re Estate of Gardiner, 5 Ariz. App. 239, 240-41, 425 P.2d 427,
428-29 (1967) (second alteration in Estate of Zilles).
¶8 In Arizona, a spendthrift provision in a trust “is valid
only if it restrains either voluntary or involuntary transfer of a
beneficiary’s interest.”1 A.R.S. § 14-10502(A). No specific language
is necessary to create a spendthrift trust, so long as its terms
manifest an intention to create such a trust. § 14-10502(B);
Restatement (Second) of Trusts § 152 cmt. c (1959) (hereinafter
“Restatement”).2 “‘The purpose of a spendthrift trust is to protect
1 The Restatement suggests that a spendthrift provision
restraining either the voluntary or involuntary transfer of the
beneficiary’s interest, but not both, is invalid. Restatement (Second)
of Trusts § 152(1) (1959). This concept was further expanded in the
Restatement (Third) of Trusts, which states that “[f]or reasons of
policy, a spendthrift restraint that seeks only to prevent creditors
from reaching the beneficiary’s interests, while allowing the
beneficiary to transfer the interest, is invalid.” Restatement (Third)
of Trusts § 58 cmt. b(2) (2003). And “a restraint only on voluntary
transfer does not protect the interests from creditors and is thus
insufficiently effective as a practical matter to justify a departure
from the law’s general policy against restraints on alienation.” Id.
But we are not faced with that situation here because this spendthrift
provision prohibits both.
2Section 14-10106, A.R.S., states that “[t]he court shall look to
the restatement (second) of trusts for interpretation of the common
law and not to subsequent restatements of trusts to determine . . .
[a]nd effectuate the [trustor’s] intent.” Because issues related to
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
the beneficiary from himself and his creditors.’” Birdsell v. Coumbe
(In re Coumbe), 304 B.R. 378, 382 (B.A.P. 9th Cir. 2003), quoting
Richardson v. McCullough (In re McCullough), 259 B.R. 509, 517 (Bankr.
D.R.I. 2001); see also George G. Bogert & George T. Bogert, The Law of
Trusts and Trustees § 222 (rev. 2d ed. 1980) (spendthrift provisions
protect against creditors and “incompetence, imprudence, or
misfortune” of beneficiaries). And although a trustee may choose to
honor an assignment made in violation of a spendthrift clause, the
beneficiary retains the ability to cease all future payments that
would be made pursuant to that assignment because “[a] valid
spendthrift provision makes it impossible for a beneficiary to make a
legally binding transfer.” Unif. Trust Code § 502 cmt. (2000); 3
Restatement § 152 cmt. i.
¶9 Here, section 2(i) of the Trust restricts the beneficiaries’
ability to assign their interest and is the portion Milton contends is a
spendthrift provision that prohibited the assignment of his beneficial
interest. A portion of section 2 provides that a beneficiary’s interest
“shall [not] . . . be liable for the obligations or debts of said
beneficiary . . . and shall not be . . . taken on execution, breached by
creditor’s bill, garnishment, or other process or writ by any person
having . . . a claim against said beneficiary.” This clause clearly
prohibits the involuntary transfer of a beneficiary’s interest to satisfy
the beneficiary’s creditors.
spendthrift trusts necessarily implicate the intent of the trustor, we
rely on the Restatement (Second) of Trusts, and not the more recent
Restatement (Third) of Trusts. The parties do not address and we do
not decide the validity of § 14-10106 because reliance on the
Restatement (Third) of Trusts would not have changed the result of
this case.
3The Arizona Trust Code was derived from the Uniform Trust
Code, and § 14-10502 is similar to Unif. Trust Code § 502. See 2008
Ariz. Sess. Laws, ch. 247, § 16. When a statute is based upon a
uniform or model act, we assume the legislature intended to adopt
the interpretation of the statute placed on it by the drafters of the
model act when the language is the same. State v. Sanchez, 174 Ariz.
44, 47, 846 P.2d 857, 860 (App. 1993).
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
¶10 The provision also states that the beneficiary’s interest
“shall not be assignable in any manner,” and that “no part [of the
beneficiary’s interest] shall be anticipated, pledged, encumbered,
hypothecated, or in any way disposed of by said beneficiary.” This
clause thus prohibits voluntary transfers by the beneficiary of his
interest in any way. The provision lastly provides that “[a]ll
payments provided in the trust for said beneficiary shall be paid
directly to him or her . . . and to no other person or entity.” This
supports the overall reading of this provision to provide a blanket
prohibition on any assignment of the beneficiary’s interest to
another party or entity. See Estate of Zilles, 219 Ariz. 527, ¶ 8, 200
P.3d at 1027. The provision at issue therefore clearly manifests an
intent to restrain both voluntary and involuntary assignments and is
thus a valid spendthrift clause that prohibited any assignment of
Milton’s beneficial interest in the Trust. 4 See § 14-10502(A);
Restatement § 152 cmt. c. The trial court erred in concluding
otherwise.
¶11 The Weinsteins, however, argue that the broad
discretionary powers granted to the trustee and the placement of the
spendthrift provision within the section delineating those powers
clearly show the provision was intended to prohibit assignments
only to third party creditors and not co-beneficiaries. Section 2, in
addition to containing the spendthrift provision, also details the
trustee’s powers in distributing Trust property. Section 2(a) states
“the Trustee shall have full power and authority to manage and
control said property . . . as though he were the absolute and
unqualified owner of it.” Section 2(i) allows the Trustee, “in his
discretion, . . . to transfer absolutely to any or all of said
beneficiaries, . . . any portion not exceeding one half of the trust
property or proceeds.”
¶12 The terms of the Trust do not support the Weinsteins’
interpretation. Although the trustee was given broad powers to
4Because we conclude that the assignment was invalid under
the terms of the Trust, we need not address Milton’s additional
claim that the assignment is invalid because it was procured under
duress.
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
distribute and manage Trust property in any manner he saw fit,
nothing in this section allows the trustee to affect the beneficiary’s
ownership interest in whatever property is in the Trust at any given
time. Transferring up to one-half of the Trust property to a
beneficiary would not extinguish that or any other beneficiary’s
interest in the Trust. Regardless of any property management or
distributions by the trustee, the beneficiary’s interest in the Trust is
owned by that beneficiary and, under the express terms of the Trust,
is not subject to alienation by the beneficiary or anyone else,
including the trustee. See Restatement § 152 cmt. i.
¶13 Additionally, the fact that the assignment here arguably
went to co-beneficiaries and not a third party creditor does not affect
the spendthrift clause’s prohibition on any voluntary assignment of
a beneficiary’s interest. The Weinsteins have not cited any authority,
nor have we found any, that states a beneficiary’s assignment of his
interest, in violation of a spendthrift clause, becomes valid if the
assignment is to co-beneficiaries rather than a third party. And such
a rule would undermine the spendthrift clause’s goal of
“‘protect[ing] the beneficiary from himself’” and would
consequently frustrate the trustor’s intent. Coumbe, 304 B.R. at 382,
quoting Richardson, 259 B.R. at 517; see also Estate of Zilles, 219 Ariz.
527, ¶ 8, 200 P.3d at 1027. Moreover, Milton’s interest was not
assigned to his co-beneficiaries, but rather to a trust for the benefit of
Carrie’s and Steven’s children, who are not direct beneficiaries of the
Trust. The Weinsteins’ argument that the assignment was valid
under the terms of the Trust therefore fails.
¶14 But the Weinsteins argue that, even if the assignment
was invalid, the trial court correctly concluded that Milton has since
ratified the assignment by accepting the $75,000 he received in
consideration. We determine de novo whether any genuine issues
of material fact precluded summary judgment and whether the trial
court correctly applied the law. See Dayka & Hackett, LLC v. Del
Monte Fresh Produce N.A., 228 Ariz. 533, ¶ 6, 269 P.3d 709, 711-12
(App. 2012).
¶15 Under the current Arizona Trust Code, “[a] trustee is
not liable to a beneficiary for breach of trust if the beneficiary
consented to the conduct constituting the breach, released the
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
trustee from liability for the breach or ratified the transaction
constituting the breach.” A.R.S. § 14-11009.5 But an unauthorized
act of a trustee may be consented to or ratified only if, “[a]t the time
of the consent, release or ratification, the beneficiary [knew] of the
beneficiary’s rights [and] of the material facts relating to the breach.”
§ 14-11009(2); Unif. Trust Code § 1009 cmt. (“To constitute a valid
consent, the beneficiary must know of the beneficiary’s rights and of
the material facts relating to the breach.”); see also Garrett v. Reid-
Cashion Land & Cattle Co., 34 Ariz. 245, 269, 270 P. 1044, 1052 (1928)
(beneficiary may ratify breach of trust only if beneficiary has “full
knowledge” of act and its effects); Restatement § 216 cmt. k; Bogert
& Bogert, supra, § 564. The requirement of full disclosure is an
extension of the trustee’s duty of loyalty, which includes the duty to
deal fairly with the beneficiary and make complete disclosures.
Bogert & Bogert, supra, §§ 544, 564; see also Restatement §§ 216 cmt.
k, 170(2). Consequently, even if a beneficiary has the required
knowledge, the ratification will not be valid if it was “induced by
improper conduct of the trustee.” § 14-11009(1).
¶16 In order for a trustee to later rely on a beneficiary’s
consent or ratification of an unauthorized act, the trustee has the
burden of showing the beneficiary knew of his “rights [and] of the
material facts relating to the breach.” § 14-11009(2); see also
Restatement § 216 cmt. k. The fact that a beneficiary had the
required knowledge must be proven and will not be assumed.
Garrett, 34 Ariz. at 269, 270 P. at 1052. And mere silence is not
enough; a beneficiary must act affirmatively to consent to or ratify a
trustee’s actions. Unif. Trust Code § 1009 cmt.; Restatement § 216
cmt. a. Thus, “[t]he maxim, ‘[ignorance of the law excuses no one],’
cannot be invoked in such a case.” Garrett, 34 Ariz. at 269, 270 P. at
1052.
¶17 In the context of a spendthrift trust, the consent of the
beneficiary “should be invalid if [it] directly or indirectly result[s] in
an alienation of that beneficiary’s interest or make[s] it liable to his
debts.” Bogert & Bogert, supra, §§ 941, 942 (principles controlling
5 Neither party challenges the applicability of A.R.S. § 14-
11009.
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
consent by beneficiaries apply equally to ratification); see also
Restatement § 216 cmt. e (spendthrift beneficiary’s consent to
unauthorized act does not alter principle that the “interest of the
beneficiary is not transferable by him or subject to the claims of his
creditor”); In re Wentworth, 129 N.E. 646, 648 (N.Y. 1920) (beneficiary
of statutory spendthrift trust cannot consent to alienation by trustee
that would destroy trust). Any rule to the contrary would allow the
beneficiary to avoid the spendthrift provision and would be
“directly in the teeth of the clearly indicated wishes of the [trustor].”
Cowan v. Hamilton Nat’l Bank, 146 S.W.2d 359, 368 (Tenn. 1941). The
spendthrift beneficiary simply does not have the power “to thwart
the purpose of the [provision].” Id. Accordingly, because Milton
could not have consented to or ratified the alienation of his
beneficial interest in the Trust, the trial court erred in concluding
otherwise.
¶18 Nevertheless, in many cases it would be unjust to hold
the trustee liable for payments actually made even though the
payments were made in contravention of a spendthrift provision.
Although the assignment may be invalid prospectively, the trustee
would not be liable for any distributions made pursuant to the
purported assignment before the beneficiary invokes the spendthrift
clause. See Unif. Trust Code § 502 cmt.; Restatement § 152 cmt. i.
The unauthorized assignment effectively acts as “a revocable order
to the trustee to pay” the assignee whatever distributions the
beneficiary is entitled to receive. Restatement § 152 cmt. i. Thus,
“the trustee is under no liability to the beneficiary” for making a
payment to a purported assignee in accordance with a beneficiary’s
unrevoked assignment. Id. Additionally, if the assignment was
made for value, but the beneficiary later revokes the trustee’s
authority to make the purported distributions, the beneficiary is
personally liable to the assignee. Restatement § 152 cmt. k.
¶19 At oral argument, Milton contended the trustee
committed a breach of trust by failing to provide him a copy of the
Trust and an accounting both before and after the assignment was
effectuated. However, the same rationale that protects a trustee
from liability for making distributions based on a purported
assignment by a spendthrift beneficiary also protects the trustee
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
under these circumstances. Just as the trustee is shielded from
liability for making payments based on an unrevoked assignment,
he also is shielded for failing to provide an accounting or other trust
documents when the beneficiary has purported to repudiate all
interest in the trust. See Restatement § 152 cmt. i. Moreover, at the
time the assignment was executed, beneficiaries were entitled to the
terms of the trust and an accounting only “[u]pon reasonable
request.” 1973 Ariz. Sess. Laws, ch. 75, § 4 (enacting A.R.S. § 14-
7303). Because Milton does not contend he ever requested a copy of
the Trust or an accounting, this argument is without merit.
¶20 The Trust here, by its terms, terminated upon Bernard’s
death in 2010, and at oral argument both parties conceded the Trust
property had been distributed. However, the record is unclear on
when exactly the distribution occurred. If the distribution of any
part of Milton’s beneficial interest in the Trust occurred prior to
Milton’s “revocation” of the assignment, then the distribution was
valid and the trustee would not be liable. See Unif. Trust Code § 502;
Restatement § 152 cmt. i. Conversely, if the distribution of any part
of Milton’s interest had not yet occurred when he invoked the
spendthrift provision, that portion of the distribution was not valid.
See Restatement § 152 cmt. i. However, the record does not indicate
when Milton’s beneficial interest in the Trust was distributed when
compared to Milton’s revocation of his assignment, and we therefore
cannot determine whether the trustee would be protected on this
basis. Accordingly, we cannot uphold summary judgment on this
basis.
¶21 The Weinsteins further argue that we may nonetheless
affirm the trial court’s grant of summary judgment because the court
correctly concluded the doctrine of laches bars any claims
purporting to set aside the assignment. We review a trial court’s
ruling on laches for an abuse of discretion. Rash v. Town of
Mammoth, 233 Ariz. 577, ¶ 17, 315 P.3d 1234, 1240 (App. 2013). “The
court abuses its discretion if no substantial evidence in the record
supports the court’s conclusion.” Id. Additionally, although we
review the court’s legal conclusions de novo, we defer to its “factual
findings unless clearly erroneous.” Id.
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
¶22 A beneficiary may be prevented from challenging an act
made in violation of the terms of the trust by the doctrine of laches.
Restatement § 219; Bogert & Bogert, supra, §§ 564, 948; Tierra Ranchos
Homeowners Ass’n v. Kitchukov, 216 Ariz. 195, ¶ 24, 165 P.3d 173, 179
(App. 2007) (Arizona courts follow Restatement in absence of
governing law to contrary). Laches is the “equitable counterpart to
the statute of limitations, designed to discourage dilatory conduct.”
Sotomayor v. Burns, 199 Ariz. 81, ¶ 6, 13 P.3d 1198, 1200 (2000).
“Laches will generally bar a claim when the delay is unreasonable
and results in prejudice to the opposing party” even where the
applicable statute of limitations has not yet expired. Id.; see also
Highland Vill. Partners, L.L.C. v. Bradbury & Stamm Constr. Co., 219
Ariz. 147, ¶ 16, 195 P.3d 184, 188 (App. 2008) (parties “protected
against any prejudicial delay in bringing a claim within the statute
of limitations by the doctrine of laches.”).
¶23 To determine whether the delay was unreasonable,
courts must “examine the justification for delay, including the extent
of plaintiff’s advance knowledge of the basis for challenge.” Harris
v. Purcell, 193 Ariz. 409, ¶ 16, 973 P.2d 1166, 1169 (1998). A
beneficiary who immediately files an action after his interest is
repudiated, for example, is not barred by laches. See Gabitzsch v.
Cole, 95 Ariz. 15, 19-20, 386 P.2d 23, 26 (1963). But where “the trustee
has repudiated the trust to the knowledge of the beneficiary and the
beneficiary fails to bring suit, he may be barred by laches.”
Restatement § 219 cmt. g. The unreasonable delay “must also result
in prejudice, either to the opposing party or to the administration of
justice, which may be demonstrated by showing injury or a change
in position as a result of the delay.” League of Ariz. Cities & Towns v.
Martin, 219 Ariz. 556, ¶ 6, 201 P.3d 517, 519 (2009) (citation omitted).
¶24 Milton’s petition for an accounting came twelve years
after his purported assignment, and more than two years after the
death of the trustee, Bernard. He argues this delay was not
unreasonable because he was unaware his assignment was
prohibited, he never was provided with an accounting to determine
whether the $75,000 was fair consideration, and Bernard coerced
him into signing the document. Although Milton may not have
been aware the terms of the Trust prohibited the assignment, he has
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
been aware of the two other bases for challenging the assignment
since 2000. See Harris, 193 Ariz. 409, ¶ 16, 973 P.2d at 1169.
¶25 Milton claims the Trust’s failure to provide him an
accounting was a breach of trust, but he offers no explanation for
failing to file an action based on the alleged breach since 2000. Nor
does he explain why, twelve years after the assignment, he decided
to seek an accounting to determine whether the consideration he
received in 2000 was adequate. Milton also asserted that he had
been coerced into making the assignment around the time he
executed it. Thus, he clearly had knowledge of these bases for his
petition for accounting since the assignment and substantial
evidence supports the trial court’s conclusion that the twelve-year
delay in bringing this action is unreasonable. See Harris, 193 Ariz.
409, ¶ 16, 973 P.2d at 1169; see also Gabitzsch, 95 Ariz. at 19-20, 386
P.2d at 26.
¶26 In order to bar the claim based on laches, the
unreasonable delay also must result in prejudice to the opposing
party or the administration of justice. Martin, 219 Ariz. 556, ¶ 6, 201
P.3d at 519. As we have stated before, “[f]inality in the
administration of estates” is a primary purpose of trust and probate
law. See In re Estate of Wood, 147 Ariz. 366, 368, 710 P.2d 476, 478
(App. 1985); see also In re Estate of Winn, 214 Ariz. 149, ¶ 20, 150 P.3d
236, 240 (2007); A.R.S. § 14-1102(B)(3). This finality is “intended to
protect the decedent’s successors and creditors from disruptions to
possession of the decedent’s property.” Estate of Winn, 214 Ariz. 149,
¶ 20, 150 P.3d at 240.
¶27 Milton waited twelve years after purportedly assigning
his interest, during which the trustee died, the Trust was terminated,
and its corpus distributed. Under the terms of the assignment,
Milton’s beneficial interest was placed in a separate trust for the
benefit of Steven’s and Carrie’s children. Granting Milton’s
requested relief of setting aside the assignment, ordering an
accounting, and freezing all Trust assets would involve reopening a
terminated and distributed trust and undoing ten years of Trust
management by a trustee who is now deceased and unavailable as a
witness, as well as undoing the management by Steven and Carrie
over the trusts established for their children’s benefit. We find that,
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
as a matter of law, this would substantially prejudice Steve and
Carrie and the administration of justice and undermine one of the
primary goals of trust law. See Martin, 219 Ariz. 556, ¶ 6, 201 P.3d at
519; see also Estate of Winn, 214 Ariz. 149, ¶ 20, 150 P.3d at 240.
¶28 Accordingly, the trial court did not abuse its discretion
in finding Milton’s claim to set aside the assignment barred by
laches. 6 See Rash, 233 Ariz. 577, ¶ 17, 315 P.3d at 1240.
Consequently, because Milton cannot challenge the assignment, he
has no interest in the Trust as a beneficiary based on the invalid
assignment of his interest and therefore does not have standing to
seek an accounting on that basis. See § 14-10201(A).
¶29 Milton cites Olympia Mining & Milling Co. v. Kerns, 135
P. 255, 262 (Idaho 1913), for the proposition that “in an action by the
cestui que trust or beneficiary against the trustee to enforce an
express continuing trust, the defense of the statute of limitations or
laches is never available to the defendant.” Even if that were the law
in Arizona, it would not change the result here. Indeed, the court in
Kerns makes clear that the defense is available in circumstances like
those before us, where there is no “express, continuing trust.” Id.
The Trust here terminated upon the trustee’s death in 2010 and
Milton did not file his petition until 2012. Had Milton filed his
petition prior to the Trust’s termination, it indeed would still have
been a “continuing trust.” Because Milton did not bring his action
until after the termination of the Trust, the defense of laches is
available to the Weinsteins under Kerns.
¶30 Milton additionally argues he has standing to seek an
accounting because he reacquired an interest in the Trust through
Bernard’s will. He reasons that because he effectuated a power of
attorney “coupled with an interest” in favor of Bernard, as trustee of
the Trust, before his purported assignment, his father acquired an
interest in the Trust which passed to Milton as a residuary
beneficiary of Bernard’s estate under Bernard’s will. To the extent
6 Because we are affirming the trial court’s ruling based on
laches, we need not address the Weinsteins’ alternative argument
that we may affirm based on the statute of limitations.
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
we must interpret the power of attorney executed by Milton, we
conduct a de novo review. See Anozira Dev., Inc., 149 Ariz. at 412,
719 P.2d at 298.
¶31 A general “power of attorney” is a “written instrument
by which a principal designates another person as the principal’s
agent.” A.R.S. § 14-5501(A). In contrast, a “‘power [of attorney]
coupled with an interest’ means a power that forms a part of a
contract and is security for money or for the performance of a
valuable act.” § 14-5501(E)(2). This latter type of power is not
merely an interest in the exercise of the power, but an interest in the
property over which the power operates. Phx. Title & Trust Co. v.
Grimes, 101 Ariz. 182, 184, 416 P.2d 979, 981 (1966). A power
coupled with an interest survives the person giving it and is
irrevocable. Id. at 184-85, 416 P.2d at 981-82.
¶32 In June 1999, the Trust was amended to continue until
the trustee’s death and also stated that “each beneficiary agrees to
execute an Irrevocable Special Power of Attorney coupled with an
interest to Trustee, Bernard Weinstein, as his or her Attorney-In-Fact
pertaining to any and all matters involving” the Trust. But the only
power of attorney in the record is a “General Power of Attorney”
executed by Milton in March 2000 in favor of Bernard. Although
that power authorized Bernard to conduct a myriad of general
business and financial matters on Milton’s behalf, it made no specific
reference to the Trust and states it can be revoked or terminated by
Milton in writing at any time.
¶33 The power of attorney signed by Milton was thus only a
general power authorizing Bernard to conduct any act related to any
business transaction on Milton’s behalf. See § 14-5501(A). Nothing
in the document suggests it was specifically coupled with an interest
in the Trust. Additionally, the power of attorney here expressly
allowed Milton to revoke or terminate the power at any time, which
is inconsistent with both the Amendment, which states that the
special power of attorney shall expire on Bernard’s death, and the
irrevocable nature of a “power of attorney coupled with an interest.”
See Grimes, 101 Ariz. at 184, 416 P.2d at 981. Bernard did not
therefore receive an interest in the Trust by way of the power of
attorney, and, consequently, Milton did not inherit any interest in
14
IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
the Trust as a residuary beneficiary of Bernard’s will and does not
have standing to seek an accounting on this basis. 7 See § 14-
10201(A).
¶34 Milton, however, appears to argue that the terms of the
power of attorney should be governed by its reference in the 1999
Amendment, rather than the executed power of attorney. And
because the 1999 Amendment stated the power of attorney was
“coupled with an interest,” he claims we should conclude that
Bernard acquired an interest in the Trust which survived his death
and passed through his will to Milton as a residuary beneficiary.
But Milton cites no authority for his proposition that a reference to
an intent to execute a power of attorney would either carry any legal
weight by its own terms or trump the terms of the actual power of
attorney he executed. Because the executed power of attorney did
not grant Bernard any interest in the Trust, we consequently reject
Milton’s argument that the description provided in the 1999
Amendment is controlling as a matter of law.
¶35 Milton’s only factual support on this issue is his
assertion that the executed power of attorney explicitly states it
covers “all proceeds and investments made therefrom, in accounts
held by Prudential Securities known as the Special Account and
Marana Trust Account, together with all other funds derived from
said Trust presently in any financial institutions.” Milton’s claim,
however, misrepresents the record. The quoted language does not
appear anywhere in the power of attorney signed by Milton, but
instead appears in the 2000 assignment of his beneficial interest in
the Trust. The power of attorney signed by Milton in favor of
Bernard makes no mention of the Trust or any accounts in
particular. Milton has thus not provided any legal or factual
support for his assertion that the power of attorney executed by
Milton was “coupled with an interest.” Accordingly, we reject his
7Milton does not cite any authority that a special power of
attorney coupled with an interest that terminates on Bernard’s death
would convey an inheritable estate to Milton. But, having decided
no special power of attorney with an interest was given, we need not
decide that issue.
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IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
argument that the power of attorney gave Bernard an interest in the
Trust which passed to Milton as a residuary beneficiary under
Bernard’s will.
¶36 Milton also suggests he inherited an interest in Trust
property because as a residuary beneficiary of Bernard’s will, he
acquired an interest in an account that commingled personal and
Trust funds. Milton reasons that because of the commingling, the
entire account must be treated as Trust funds and he therefore
inherited an interest in Trust property. When the material facts are
not disputed, we review questions of law de novo. Pinal Vista
Properties, L.L.C. v. Turnbull, 208 Ariz. 188, ¶ 6, 91 P.3d 1031, 1032-33
(App. 2004).
¶37 A trustee is under a duty to “keep trust property
separate from the trustee’s own property.” A.R.S. § 14-10810(B).
When a trustee commingles trust funds with his own personal
funds, “the entire commingled mass should be treated as trust
property except in so far as the trustee may be able to distinguish
what is his.” Hurst v. Hurst, 1 Ariz. App. 603, 607, 405 P.2d 913, 917
(1965). When such commingling occurs, it is “incumbent upon the
trustee . . . to distinguish his personal funds.” Id. If he cannot, any
claimed personal assets must be treated as trust assets. Id.
¶38 In his will, Bernard listed a “1/4 interest” in the
“Marana Trust account” as his sole and separate property which
was bequeathed equally among Steven, Carrie, and Milton as
residuary beneficiaries. Under the assets that he held as trustee of
the Trust, he listed a “3/4 interest in Marana Trust account.” We
agree with the Weinsteins that the terms of Bernard’s will show that
he, as trustee, could distinguish his personal funds from Trust
property. See id. Milton has not provided any additional evidence
as to what would inhibit the simple division of the account
according to the terms of Bernard’s will, or that Bernard’s division
was incorrect. We therefore conclude that Milton has not shown he
reacquired an interest in the Trust by way of his inheritance under
his father’s will.
¶39 Thus, because Milton cannot challenge the assignment
of his interest in the Trust, and he did not reacquire an interest in the
16
IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
Trust via Bernard’s will, he is not a beneficiary of the Trust and has
no property interest in the Trust. Consequently, the trial court
correctly found that he is not an “interested person,” and has no
standing to petition for an accounting. See § 14-10201(A).
Attorney Fees
¶40 Milton additionally argues the trial court abused its
discretion by awarding the Weinsteins’ their attorney fees pursuant
to A.R.S. § 14-11004(B)8 because their affidavit did not comply with
Rule 33, Ariz. R. Prob. P., governing the compensation for fiduciaries
and attorneys under Title 14, or the Arizona Code of Judicial
Administration § 3-303 (“ACJA”). That section of the ACJA sets the
statewide fee guidelines for determining reasonable compensation
by professionals in Title 14 proceedings. The Weinsteins, however,
ask us to find those rules are not applicable to this case.
¶41 We review an award of attorney fees for an abuse of
discretion and view the record in the light most favorable to
upholding the trial court’s decision. Solimeno v. Yonan, 224 Ariz. 74,
¶ 36, 227 P.3d 481, 489 (App. 2010). “‘We will not disturb the trial
court’s discretionary award of fees if there is any reasonable basis
for it.’” Orfaly v. Tucson Symphony Soc’y, 209 Ariz. 260, ¶ 18, 99 P.3d
1030, 1035 (App. 2004), quoting Hale v. Amphitheater Sch. Dist. No. 10,
192 Ariz. 111, ¶ 20, 961 P.2d 1059, 1065 (App. 1998). However, we
review questions related to the interpretation or application of court
rules de novo. Haroutunian v. Valueoptions, Inc., 218 Ariz. 541, ¶ 22,
189 P.3d 1114, 1122 (App. 2008).
¶42 Pursuant to § 14-11004(B), a court “may order that a
party’s reasonable fees, expenses and disbursements” arising out of
“the good faith defense or prosecution of a judicial . . . proceeding
involving the administration of the trust” be paid by “any other
party . . . that is the subject of the judicial proceeding.” Rule 33
delineates the requirements for an application of fees by an attorney
representing a fiduciary in Title 14 proceedings, and in subsection
8 Neither party challenges the applicability of A.R.S. § 14-
11004(B).
17
IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
(F) states the court must follow the guidelines set forth in the ACJA.
But the comment to Rule 33 states the “rule applies only to those
circumstances in which . . . an attorney seeks compensation from the
estate of a ward or protected person, a decedent’s estate, or a trust,”
but does not apply “when a party has requested that the court
award the party attorneys’ fees against another party.” The ACJA
additionally specifies that its guidelines do not apply “[w]hen the
fees are not paid by the Estate.” § 3-303(B)(2)(b)(2).
¶43 Here, the trial court granted the Weinsteins’ request for
an award of attorney fees to be entered against Milton pursuant to
§ 14-11004(B). Because the Weinsteins did not request, and were not
awarded, any reimbursement from the Trust itself, Rule 33 and
ACJA § 3-303 are not applicable in this situation. Consequently,
Milton’s argument that the Weinsteins’ award of attorney fees
should have been reduced or denied based on noncompliance with
those rules fails.
The Weinsteins’ Cross-Appeal
¶44 In their cross-appeal, the Weinsteins first ask this court
to conduct a de novo review of the attorney fees award because the
trial court did not explain its reasoning for the amount it awarded in
its minute entry. The Weinsteins rely on our recommendation that
trial courts “indicate on the record the factors taken into account and
reasons for [reducing] a discretionary fee award.” Kadish v. Ariz.
State Land Dep’t, 177 Ariz. 322, 326, 868 P.2d 335, 339 (App. 1993); see
also Associated Indem. Corp. v. Warner, 143 Ariz. 567, 571, 694 P.2d
1181, 1185 (1985). Although doing so is “the better practice,” a court
is not required to provide a factual basis for a fee award. Kadish, 177
Ariz. at 326, 868 P.2d at 339; Orfaly, 209 Ariz. 260, ¶ 25, 99 P.3d at
1037. “As long as the record reflects a reasonable basis for the
award, we will uphold it.” Id.; see also Kadish, 177 Ariz. at 326-27, 868
P.2d at 339-40.
¶45 The Weinsteins provide no legal support for their
proposition that when a fee award does not contain a detailed
factual basis, it should be subject to a de novo review.
Consequently, we reject that argument and review their challenge to
the attorney fees award for an abuse of discretion. See Hunt Inv. Co.
18
IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
v. Eliot, 154 Ariz. 357, 362, 742 P.2d 858, 863 (App. 1987). “The trial
court may reduce the amount of requested fees and, absent a clear
abuse of discretion, the award will not be disturbed on appeal.” Id.
¶46 The Weinsteins argue the trial court abused its
discretion by awarding them an amount that was lower than what
they requested. They contend that because Milton did not meet his
burden of demonstrating why the Weinsteins’ billing entries were
“immaterial, irrelevant or otherwise unreasonable,” the trial court
was obligated to award the Weinsteins the total amount of fees they
requested.
¶47 A party seeking an award of attorney fees has the
burden of presenting an affidavit indicating “the type of legal
services provided, the date the service was provided, the attorney
providing the service (if more than one attorney was involved in the
appeal), and the time spent in providing the service.” Schweiger v.
China Doll Rest., Inc., 138 Ariz. 183, 188, 673 P.2d 927, 932 (App.
1983). Once the application has been submitted, “the burden shifts
to the party opposing the fee award to demonstrate the impropriety
or unreasonableness of the requested fees.” Nolan v. Starlight Pines
Homeowners Ass’n, 216 Ariz. 482, ¶ 38, 167 P.3d 1277, 1286 (App.
2007); see also State ex rel. Corbin v. Tocco, 173 Ariz. 587, 594, 845 P.2d
513, 520 (App. 1992). A party challenging the amount of fees
requested must provide specific references to the record and specify
which amount or items are excessive. Tocco, 173 Ariz. at 594, 845
P.2d at 520. “‘[A]n opposing party does not meet his burden merely
by asserting broad challenges to the application. It is not enough . . .
simply to state, for example, that the hours claimed are excessive
and the rates submitted too high.’” Id., quoting State v. Maricopa
Cnty. Med. Soc’y, 578 F. Supp. 2d 1262, 1264 (D. Ariz. 1984); see also
Inspiration Consol. Copper Co. v. Ariz. Dep’t of Revenue, 147 Ariz. 216,
234, 709 P.2d 573, 591 (App. 1985) (state’s assertions that amount
requested far exceeded its own fees without references to specified
billing items insufficient), disapproved of on other grounds by Cyprus
Bagdad Copper Corp. v. Ariz. Dep’t of Revenue, 188 Ariz. 345, 348, 935
P.2d 923, 926 (App. 1997).
¶48 Here, the Weinsteins submitted a sufficient China Doll
affidavit to the trial court requesting a total of $17,833.45 in fees and
19
IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
costs. Milton submitted an objection to that affidavit, identifying
two specific examples of charges he considered unreasonable.9 First,
he argued the thirty-six hours spent on the motion for summary
judgment and twenty-two hours spent on the reply were excessive
and not justified because the legal issues involved in the case were
not particularly novel. Milton additionally argued the 2.5 hours
spent preparing the form of judgment and China Doll affidavit was
excessive because “its preparation is mostly secretarial.” The trial
court issued an order awarding the Weinsteins $11,282.25, but did
not indicate in the minute entry its reasons for awarding that
amount. A hearing on the matter was then held, during which the
court indicated it had reduced the award because it found the hours
spent on the summary judgment motion and reply “excessive.”
Following the hearing, the court issued another order, vacating its
earlier ruling on the attorney fees, and ordering the Weinsteins be
awarded $11,874 but again did not indicate its reasons for that
amount.
¶49 Milton’s two specific challenges to the Weinsteins’
affidavit were sufficient to allow the trial court to make a finding of
reasonableness on the amount of fees it awarded the Weinsteins. See
Tocco, 173 Ariz. at 594, 845 P.2d at 520. Additionally, following the
hearing, the court raised the amount of fees it awarded. The court
could therefore have found the Weinsteins’ explanation for its fees
adequately justified a higher amount, although not the entire
amount requested. See id. Consequently, because Milton’s
objections to the Weinsteins’ affidavit were sufficient and “the
record reflects a reasonable basis for the award,” we cannot say the
court abused its discretion in determining the amount of fees
9 Milton also argued the total amount of fees sought was
“unreasonable on its face” and were double his attorney fees.
However, this type of broad challenge is insufficient to demonstrate
the amount requested is unreasonable. See Tocco, 173 Ariz. at 594,
845 P.2d at 520; Inspiration Consol. Copper Co., 147 Ariz. at 234, 709
P.2d at 591. We therefore consider only the sufficiency of his
objections to the specified billing entries.
20
IN RE INDENTURE OF TRUST DATED JANUARY 13, 1964
Opinion of the Court
awarded to the Weinsteins. See Orfaly, 209 Ariz. 260, ¶ 25, 99 P.3d at
1037.
¶50 The Weinsteins rely on Tocco to support their argument
that Milton’s challenges to the approximately sixty hours spent on
the summary judgment motions and 2.5 hours to the form of
judgment and affidavit were insufficient as a matter of law. In that
case, Tocco challenged the “relevancy of 4.5 specific hours of time
billed and of 42.2 hours of billings in general” and additionally
asserted “‘the billings submitted may contain items which are
irrelevant or immaterial.’” Tocco, 173 Ariz. at 594-95, 845 P.2d at 520-
21 (emphasis omitted). The court found that the challenges to the
specific time entries were proper, but that the generalized objection
was insufficient to demonstrate the affidavit contained irrelevant or
immaterial items. Id. Thus, Tocco does not support the Weinsteins’
argument, but rather supports a finding that Milton’s objections to
the specified time entries were sufficient to raise the issue of
reasonableness. Accordingly, the Weinsteins’ argument fails.
Attorney Fees on Appeal
¶51 Both the Weinsteins and Milton have requested their
attorney fees and costs pursuant to A.R.S. § 14-11004(B). Under that
statute, a court “may order that a party’s reasonable fees, expenses
and disbursements . . . be paid by any other party . . . that is the
subject of the judicial proceeding.” § 14-11004(B). In our discretion,
we grant the Weinsteins’ request upon their compliance with Rule
21, Ariz. R. Civ. App. P. We deny Milton’s request.
Disposition
¶52 For the foregoing reasons, we affirm the judgment of
the trial court.
21