Mashler v. Mashler , 246 Ariz. 498 ( 2018 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
In re the Matter of the Estate of:
LUCILLE F. SIBLEY, Decedent.
_________________________________
JOHN S. MASHLER, et al., Petitioners/Appellees,
v.
ERNEST F. MASHLER, Respondent/Appellant.
No. 1 CA-CV 17-0369
FILED 7-26-18
Appeal from the Superior Court in Yuma County
No. S1400PB201500108
The Honorable Roger A. Nelson, Judge
AFFIRMED IN PART; VACATED IN PART
COUNSEL
Jaburg & Wilk, P.C., Phoenix
By Kathi M. Sandweiss, Roger L. Cohen
Co-Counsel for Petitioners/Appellees
Deason Garner Law Firm, Yuma
By Adam D. Hansen
Co-Counsel for Petitioners/Appellees
Dickinson Wright, PLLC, Phoenix
By Michael J. Plati
Counsel for Respondent/Appellant
MASHLER, et al. v. MASHLER
Opinion of the Court
OPINION
Presiding Judge Lawrence F. Winthrop delivered the opinion of the Court,
in which Judge Jennifer B. Campbell and Judge Paul J. McMurdie joined.
W I N T H R O P, Presiding Judge:
¶1 Ernest F. Mashler (“Ernest”) appeals from the superior court’s
judgment denying his petition to partition certain real property
(“Farmland”) and approving the restatement of his mother’s trust.
¶2 We address in this opinion whether precatory language in a
will directed to a personal representative or executor rather than devisees
creates an enforceable instruction. We hold that, read with the other
provisions of a will, precatory language may create an enforceable directive
rather than a discretionary request. Additionally, we conclude that the trial
court erred in approving a restatement of the decedent’s trust, permitting
the trustees to “decant” an otherwise irrevocable trust. We hold that,
pursuant to Arizona Revised Statutes (“A.R.S.”) section 14-10819(A)1, a
trustee has discretion to decant—the authority to appoint or distribute trust
property to a new or different existing trust with terms that differ from
those of the original trust—only when the trust instrument expressly
provides.
¶3 Accordingly, we affirm the court’s denial of Ernest’s petition
to partition the Farmland but vacate the court’s order approving
restatement of the trust.
FACTS AND PROCEDURAL HISTORY
¶4 In 1986, Lucille F. Sibley (“Lucille”) and her husband, Phillip
R. Sibley (“Phil”), created the Phil R. Sibley & Lucille F. Sibley Trust (the
“Trust”), which became irrevocable upon their deaths. Lucille and Phil had
one child together, Patricia Sibley Knott, and Lucille had three children by
1 We cite the current versions of all applicable statutes as no revisions
material to this opinion have since occurred.
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Opinion of the Court
a prior marriage, Ernest, Christine Wolleson (“Christine”), and John
Mashler (“John”).2
¶5 When Phil died in 2004, Lucille’s separate property and her
share of the community property were allocated to “Trust A.” When Lucille
died in 2015, the Trust directed that the remaining principal and income of
Trust A be distributed pursuant to the terms of Lucille’s Last Will and
Testament (the “Will”).
¶6 The Will directed that:
[A]ll liquid assets of Trust “A” shall be divided into three
equal shares and distributed free of trust to: [Ernest,
Christine, and John,] or their issue per stirpes. It is my desire
that the real property ([F]armland) which is part of Trust “A”
. . . be held in further trust and that the income of such
[F]armland, after the payment of expenses to keep it in trust,
be divided equally among [Ernest, Christine, and John,] or
their issue per stirpes. Unless required to satisfy the
administration of my estate . . . I desire that the [F]armland
not be sold until my youngest great-grandchild reaches the
age of twenty-one. At such time, the proceeds of which
would be distributed equally to [Ernest, Christine, and John,]
or their issue per stirpes.
(Emphasis added.)
¶7 Upon Lucille’s death, John applied to superior court for the
informal probate of the Will and appointment of a personal representative.
The court appointed John as personal representative. John and Christine
were the remaining co-trustees of the Trust.
¶8 Approximately one year later, John petitioned the superior
court to approve the exercise of his and Christine’s power, pursuant to
A.R.S. § 14-10819, to restate the terms of the Trust. He asserted that the
Trust “was outdated and lacked modern administrative provisions.”
Christine later joined the action. Ernest objected to their petition and filed
his own petition seeking to partition the Farmland.
¶9 After a hearing on both petitions, the superior court entered a
judgment (1) denying Ernest’s petition to partition the Farmland and (2)
approving John and Christine’s restatement of the Trust. Ernest timely
2 Patricia Sibley Knott is not a party to this appeal.
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Opinion of the Court
appealed from the judgment, and we have jurisdiction pursuant to Article
6, Section 9, of the Arizona Constitution, A.R.S. §§ 12-120.21(A)(1), and
-2101(A)(9).
ANALYSIS
I. Statute of Limitations
¶10 As a preliminary matter, John and Christine argue that Ernest
was barred from contesting the validity of the Trust by A.R.S. § 14-10604(A).
That statute provides, in relevant part, that “[a] person may commence a
judicial proceeding to contest the validity of a trust that was revocable at
the settlor’s death within . . . [o]ne year after the settlor’s death.” A.R.S.
§ 14-10604(A)(1) (emphasis added). Here, the Trust became irrevocable
upon Phil’s and Lucille’s deaths. Therefore, § 14–10604, which applies to
revocable trusts, did not preclude Ernest from contesting the validity of the
Trust.
¶11 John and Christine additionally argue that A.R.S. § 14-3306
also prohibits Ernest from contesting the Trust. Section 14-3306 prohibits
an heir “from commencing a formal testacy proceeding to contest the
probate of the will after four months have elapsed” following receipt of
information regarding informal probate of a will. A.R.S. § 14-3306(B). John
and Christine’s brief, however, fails to explain how this statute applies to
bar Ernest’s petition to partition the Farmland or his objection to John and
Christine’s petition to restate the Trust. See ARCAP 13(a)(7) (requiring
“supporting reasons for each contention” with citations to legal
authorities). Accordingly, they have waived this argument on appeal. See
Polanco v. Indus. Comm’n, 214 Ariz. 489, 491 n.2, ¶ 6 (App. 2007) (explaining
that a party who fails to develop and support an argument waives that issue
on appeal). Further, Ernest did not commence a formal testacy proceeding
to contest the probate of the Will; simply stated, § 14-3306 does not apply.
II. Construction of the Will
¶12 In appealing the denial of his motion to partition the
Farmland, Ernest first argues the superior court improperly interpreted the
Will “as directing that the Farmland be held in trust.”
¶13 The “cardinal rule” of will construction is to ascertain the
intent of the testator from the words of the will. See Newhall v. McGill, 69
Ariz. 259, 262 (1949). On appeal, we review any legal issues raised de novo,
and apply “the appropriate legal standard to the facts found” by the
superior court. In re Estate of Shumway, 198 Ariz. 323, 326, ¶ 9 (2000). “[W]e
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Opinion of the Court
do not reweigh conflicting evidence” but rather “examine the record only
to determine whether substantial evidence exists” to support the court’s
ruling. In re Estate of Pouser, 193 Ariz. 574, 579, ¶ 13 (1999).
¶14 Lucille’s intent regarding the disposition of her “liquid
assets” is easily ascertained from the language of the Will. She stated that
the assets “shall be divided into three equal shares and distributed free of
trust” to Ernest, Christine, and John. Her intent regarding the Farmland
was expressed differently. She indicated that it was her “desire” that the
Farmland “be held in further trust and that the income of such [F]armland,
after the payment of expenses to keep it in trust, be divided equally among”
Ernest, Christine, and John. She further expressed her “desire” that the
Farmland not be sold until her youngest great-grandchild turned twenty-
one.
¶15 The phrase “I desire” is “precatory,” which means
“requesting, recommending, or expressing a desire rather than a
command.” Precatory, Black’s Law Dictionary (10th ed. 2014). A precatory
trust is “[a] trust that the law will recognize to carry out the wishes of the
testator or grantor even though the statement in question is in the nature of
an entreaty or recommendation rather than a command.” Precatory trust,
Black’s Law Dictionary (10th ed. 2014). The issue we must resolve is
whether Lucille’s words placed the Farmland in the Trust.
¶16 More than seventy-seven years ago, the Arizona Supreme
Court addressed the effect of precatory language in a will. The court
interpreted a will that provided:
It is my wish, though this is not a restriction or a limitation
upon the use and enjoyment of the legacies and bequests
herein made, that my estate, after the payment of my debts,
the cash bequests and expenses of administration, shall be
kept among the descendants of my late father and mother.
In re Hayward’s Estate, 57 Ariz. 51, 58 (1941). Our supreme court concluded
that this language constituted “a recommendation or request directed to
legatees and devisees” rather than a command. Id. at 60. In reaching this
conclusion, however, the court acknowledged “many cases” in which
precatory language is properly “construed as dispositive.” Id. at 58. The
court cited with approval a California case holding that “[w]here the words
are used to describe a disposition of property, that is, where they are
directed to the executor or to the law, and not to a devisee or legatee, the
authorities are uniform that the word [‘desire’] is sufficient to declare a
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Opinion of the Court
disposition of the property.” Id. at 59 (quoting In re Tooley’s Estate, 149 P.
574, 575 (Cal. 1915)).
¶17 Several years later in Newhall v. McGill, our supreme court
explained how a court should determine whether precatory language
creates a trust:
[I]n order that a trust may arise from the use of precatory
words, the court must be satisfied, from the words
themselves, taken in connection with all the other terms of the
disposition, that the testator’s intention to create an express
trust was as full, complete, settled, and sure as though he had
given the property to hold upon a trust declared in the
ordinary manner.
69 Ariz. at 263 (citing Fields v. Fields, 3 P.2d 771, 773-74 (Or. 1931)); see In re
Conness’ Estate, 73 Ariz. 216, 218-19 (1952) (concluding that “for the
education of” was a precatory phrase that did not create a trust, but was
instead “only an expression of a wish or desire on the part of the testator to
the legatees as to how they should use the bequest”); see also In re Rowlands’
Estate, 73 Ariz. 337, 340 (1952) (“Precatory words directed to an executor
indicate a trust while the same words to a devisee do not”) (citing Newhall,
69 Ariz. 259).3
¶18 After carefully reading the language of the Will, we conclude
that the evidence supports the superior court’s finding that, Lucille’s words
regarding the disposition of the Farmland, examined with the other terms
of the Will, reflect her intent to hold the Farmland in further trust. Her
words “it is my desire” are not directed to her devisees but to the personal
representative of her estate. Unlike the testator in Hayward’s Estate, Lucille
did not include qualifying language stating that her desire should not be
construed as “a restriction or limitation.” And, most importantly, the Will
reflects Lucille’s intent to dispose of her “liquid assets” separately and
differently from the Farmland. She expressly directed that her liquid assets
be distributed “free of trust.” If Lucille wanted the same disposition for the
3 The Missouri Court of Appeals recently articulated the rule set forth
in Newhall. See Day v. Hupp, 528 S.W.3d 400, 414 (Mo. Ct. App. 2017)
(reasoning that a trust will arise from the use of precatory words only if the
court is “satisfied from the words themselves, considered in connection
with all the other terms of the disposition, that the grantor’s intention to
create a trust was as complete and certain as if she had given the property
to hold in a trust declared in the ordinary manner”).
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Opinion of the Court
Farmland, she would have so stated. Instead, she addressed the Farmland
separately and expressed her will that it be held in “further trust.”
¶19 On appeal, Ernest argues that the superior court’s ruling
contradicts the testimony of Stephen Shadle, the attorney who drafted the
Will. Although it is true that Shadle testified that the word “desire” was
precatory and not obligatory, his testimony was contradicted by a letter he
sent following Lucille’s death that stated, “I think the time for closing the
Trust and selling is about ten years out,” and that he needed “to get great
grandchildren birth dates nailed down to get the exact date.” The letter
suggests Shadle’s pre-litigation understanding that the Farmland should be
held in “further trust.” It is not for this Court to reweigh conflicting
evidence. See In re Estate of Pouser, 193 Ariz. at 579, ¶ 13.
¶20 We conclude that the language of the Will supports the
superior court’s finding that Lucille intended the Farmland to be held in
trust until her youngest great-grandchild, alive at the time of Lucille’s
death, reaches the age of twenty-one. Accordingly, we affirm the court’s
denial of Ernest’s petition to partition the Farmland.4
III. Restatement of the Trust
¶21 Ernest next argues that the superior court erred in approving
John and Christine’s restatement of the Trust pursuant to A.R.S. § 14-10819.
He asserts that the power to appoint under § 14-10819 arises only when “the
trustee has ‘discretion’ with respect to trust asset or income distributions,”
and that the Trust here did not provide such discretion. We agree.
¶22 Section 14-10819 provides, in part:
Unless the terms of the trust instrument expressly provide
otherwise, a trustee who has the discretion under the terms
of a testamentary instrument or irrevocable inter vivos
agreement to make distributions, regardless of whether a
4 Ernest’s petition also asserted that Lucille’s testamentary power of
appointment violated the rule against perpetuities set forth in A.R.S. § 14-
2901(A), because she directed that the Farmland not be sold until her
youngest great-grandchild reached the age of twenty-one. The superior
court found that the language of the Will could “be construed to apply to
the youngest great-grandchild then living at the time of Lucille’s death.”
Ernest has not challenged this ruling on appeal. Accordingly, we do not
review the superior court’s finding.
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standard is provided in the trust instrument to or for the
benefit of a beneficiary of the trust, may exercise without
prior court approval the trustee’s discretion by appointing
part or all of the trust property in favor of a trustee of another
trust.
A.R.S. § 14-10819(A) (emphasis added).
¶23 Section 14-10819(A) grants a trustee the power to “decant” an
irrevocable trust under certain conditions. As explained by the Uniform
Law Commission, decanting refers to “the distribution of assets from one
trust into a second trust, like wine is decanted from the bottle to another
vessel.”5 A trustee with decanting power has “authority to amend an
unamendable trust, in the sense that he or she may distribute the trust
property to a second trust with terms that differ from those of the original
trust.” Morse v. Kraft, 992 N.E.2d 1021, 1024 (Mass. 2013) (citation omitted).
¶24 The rationale behind decanting is that “if a trustee has
discretion to distribute trust property to or for the benefit of a beneficiary,
the trustee in effect has a limited power of appointment in favor of the
beneficiary and thereby can appoint the property to a new or existing trust
for the benefit of that beneficiary.” Alan S. Halperin, Zoey F. Orol, Modern
Variations on an Ancient Theme: Fundamental Changes in Trust Law-Part II,
N.Y. St. B.J. 25, 26 (March/April 2017). Thus, it is a trustee’s discretionary
authority to make distributions in favor of a beneficiary that provides the
premise for decanting. See William R. Culp, Jr., Briani Bennett Mellen, Trust
Decanting: An Overview and Introduction to Creative Planning Opportunities,
45 Real Prop. Tr. & Est. L.J. 1 37-38 (2010). Based on this rationale, Arizona’s
statute, like those of other states, requires that a trustee have the power to
make discretionary distributions for the benefit of a beneficiary under the
terms of the original trust. See A.R.S. § 14-10819(A); see also Ferri v. Powell-
Ferri, 72 N.E.3d 541, 553-54 n.12 (Mass. 2017) (citing decanting statutes from
twenty-seven states).6
5 The Uniform Trust Decanting Act, A Summary,
http://www.uniformlaws.org/shared/docs/trustdecanting/UTDA%20-
%20Summary.pdf
6 The Uniform Trust Decanting Act likewise authorizes decanting
only when the trust confers discretionary distribution powers. See UNIFORM
TRUST DECANTING ACT, §§ 11, 12 (UNIF. LAW COMM’N 2015).
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¶25 We have reviewed the Trust here and find no evidence that
John and Christine, as trustees, have discretion to make distributions for the
benefit of the beneficiaries, who include themselves. Prior to Lucille’s
death, the trustees had discretion to distribute principal for the benefit of
Lucille’s “maintenance, support, health and well being.” Upon Lucille’s
death, the trustees had discretion to draw upon the principal to cover any
funeral expenses and death taxes. However, the Trust provides no
authority for the trustees to make discretionary distributions for the benefit
of the beneficiaries following Lucille’s death.
¶26 John and Christine cite Article IV(B) of the Trust, which
provides that, upon Lucille’s death, the trustees:
[S]hall distribute the then remaining principal and
undistributed income to or hold the same for the benefit of
such person or persons or the estate of [Lucille] in such
amounts and proportions, for such estates and interests, and
outright, or upon such terms, trusts, conditions and
limitations as [Lucille] shall appoint by a Will referring
specifically to this power of appointment.
This provision directs John and Christine to distribute or hold the Trust
principal and income in compliance with Lucille’s Will. It does not grant
John and Christine discretion over the distribution of principal or income.
¶27 Alternatively, John and Christine argue “that the
discretionary power need not come directly from the testamentary
instruments themselves.” We disagree. Section 14-10819 expressly requires
that the trustee’s discretion come from “the terms of a testamentary
instrument or irrevocable inter vivos agreement.” A.R.S. § 14-10819(A).
¶28 Because the Trust does not grant John and Christine the
discretion to make distributions for the benefit of the beneficiaries, they did
not have the authority to restate the Trust pursuant to § 14-10819.
Accordingly, we vacate that portion of the superior court’s judgment. The
original Trust remains in effect. If the parties wish to modify the Trust
going forward, they must follow the appropriate statutory procedure. See
A.R.S. § 14-10410.
IV. Attorneys’ Fees
¶29 John and Christine request an award of attorneys’ fees on
appeal pursuant to A.R.S. § 14-11004, which provides:
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A. A trustee . . . is entitled to reimbursement from the trust
for that person’s reasonable fees, expenses and disbursement,
including attorney fees and costs, that arise out of and that
relate to the good faith defense or prosecution of a judicial
. . . proceeding involving the administration of the trust,
regardless of whether the defense or prosecution is successful.
B. A court . . . may order that a party’s reasonable fees,
expenses and disbursements pursuant to subsection A be
paid by any other party or the trust that is the subject of the
judicial proceeding.
A.R.S. § 14-11004. We grant John and Christine’s request for an award of
reasonable attorneys’ fees and costs on appeal to be paid by the Trust
pursuant to § 14-11004(A) but deny their request for fees against Ernest
personally pursuant to § 14-11004(B).
CONCLUSION
¶30 For the foregoing reasons, we affirm the superior court’s
denial of Ernest’s petition to partition the Farmland but vacate the court’s
approval of the restated trust. We award John and Christine their
reasonable attorneys’ fees and costs on appeal upon their timely compliance
with Arizona Rule of Civil Appellate Procedure 21.
AMY M. WOOD • Clerk of the Court
FILED: JT
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