Newbanks v. Newbanks ( 2023 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
In the Matter of:
The Newbanks Family Revocable Trust
Dated May 16, 1985,
A Trust.
__________________________________
NANCI NEWBANKS, Petitioner/Appellant,
v.
SCOTT H. NEWBANKS, et al., Respondents/Appellees.
No. 1 CA-CV 21-0713
FILED 1-5-2023
Appeal from the Superior Court in Mohave County
No. S8015PB201900072
The Honorable Lee Frank Jantzen, Judge
AFFIRMED IN PART; REVERSED AND REMANDED IN PART
COUNSEL
Warner Angle Hallam Jackson & Formanek, PLC, Phoenix
By Jerome K. Elwell, Phillip B. Visnansky, Yvonne S. Tindell
Counsel for Petitioner/Appellant
Andersen PLLC, Scottsdale
By Mark W. Hawkins, Mark Andersen
Counsel for Respondents/Appellees
NEWBANKS v. NEWBANKS, et al.
Decision of the Court
MEMORANDUM DECISION
Vice Chief Judge David B. Gass delivered the decision of the court, in which
Judge Cynthia J. Bailey and Chief Judge Kent E. Cattani joined.
G A S S, Vice Chief Judge:
¶1 This case involves a probate and family trust dispute between
three siblings—a daughter on one side and two sons on the other. Both
parents have passed—mother first, then father. After father died, one of the
sons, as trustees of the family trusts, told daughter she no longer had an
interest in the trusts. Daughter sought relief in the superior court, but it
rejected her claims, ruling she had violated a forfeiture clause in father’s
will and had no remaining interest in father’s sub-trust or in property
transferred from father’s sub-trust into mother’s sub-trust.
¶2 As explained below, we reverse and remand, concluding any
alleged forfeiture-clause violation is irrelevant under the controlling
documents, and daughter is entitled to an upward adjustment of her share
of the assets in mother’s sub-trust.
FACTUAL AND PROCEDURAL HISTORY
¶3 In 1985, mother and father established the family trust. In
2009, mother executed her will. When mother died in 2012, the family trust
created two sub-trusts: mother’s sub-trust and father’s sub-trust.
I. Terms of the Sub-Trusts, Will, and Amendments
¶4 The parties do not dispute the terms of mother’s sub-trust.
Mother’s sub-trust and any related terms became irrevocable upon her
death. Even so, during father’s life, he could use the principal and assets in
mother’s sub-trust. Upon mother’s death, her sub-trust included her share
of the community property. In mother’s will, she left father all her personal
effects, with each child to take one-third of the corpus of mother’s sub-trust
after father’s death.
¶5 As to father’s sub-trust, after mother died, he could add,
amend, or revoke any term. In 2015, father executed his will and the first
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amendment to his sub-trust. 1 About one month before father died in 2018,
he executed a second amendment to his sub-trust.
¶6 Upon father’s death, his will and first amendment provided
his sub-trust would include his share of the community property and any
property he did not otherwise dispose of in his will or a sub-trust
amendment. Anything remaining in father’s sub-trust would roll into—and
be distributed under the terms of—mother’s sub-trust. Under the second
amendment, father expressly excluded daughter and directed all his
property to pass to sons directly from his sub-trust with nothing passing to
mother’s sub-trust.
¶7 When father died, mother’s sub-trust was worth $360,550.
The value of father’s sub-trust at his death was the subject of the litigation.
Father’s estate and the sub-trusts incurred $335,122 in administrative costs.
Before the superior court ruled, sons had used the trust funds to pay
$128,400 of those administrative costs, reducing the total assets in the two
sub-trusts by that amount. Daughter possessed some of mother’s jewelry
(which the superior court was not able to value in its entirety) and owed
$58,000 on a loan she received from mother and father before mother died.
One son also owed $75,000 for an early disbursement.
II. Superior Court Rulings After Trial
¶8 After father’s death, disputes arose between daughter and
sons, beginning when sons sent daughter a copy of the second amendment
and told daughter she was “not a beneficiary under the Trust.” The disputes
included whether and to what extent father’s will and the first and second
amendments could modify mother’s sub-trust and whether sons were
properly following the terms of father’s will and the family trust.
¶9 After trial, the superior court found four of the five
documents controlling: the family trust, mother’s will, father’s will, and the
first amendment. The superior court did not apply the terms of the second
amendment, saying it was “more troublesome” because it “was written by
one of [the sons] who benefited from the amendment . . . just a month before
[father’s] death [and though father’s] mind was still solid, . . . the timing of
the second amendment makes it suspect.”
1 Father’s will and the amendments refer to the family trust’s terms. The
parties correctly acknowledge father could only amend his sub-trust, so for
clarity this decision refers to father’s changes as amending his sub-trust.
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¶10 The superior court also found daughter violated the forfeiture
clause and removed daughter as father’s heir. Specifically, the superior
court said,
The controlling Will dated November 5, 2015 possessed a no-
contest clause. The no-contest clause had been violated by
[daughter]. She has contested the processing of this estate and
Trust on multiple fronts. This includes filing the original
Petition for Removal of Trustees, filing, and eventually
withdrawing more than a dozen Declaratory Petitions and by
generally opposing the processing of the estate by [sons].
Based on the violation of the no-contest clause,
IT IS ORDERED removing [daughter] as an heir to this
estate.
(Emphasis in original.) The judgment did not include the same level
of detail, but it still removed daughter “as an heir to [the] Estate.”
¶11 The superior court relied on the first amendment to conclude
father intended to limit daughter’s inheritance to those items listed in the
first amendment. The superior court further ruled daughter could not share
in any assets transferred from father’s sub-trust into mother’s sub-trust.
¶12 As such, and despite finding father disinherited daughter
under his will’s forfeiture clause, the superior court, based on father’s intent
under the first amendment, awarded daughter the jewelry still in her
possession and the amount (including interest) she owed her parents on the
loan they extended to her. The superior court reduced daughter’s one-third
share in mother’s sub-trust by the value of the loan and daughter’s one-
third share of the probate’s attorney fees and costs.
¶13 After adjusting for daughter’s one-third share of attorney fees
and costs, the superior court found daughter’s share was a negative
amount. The superior court awarded sons additional attorney fees and
costs in an amount equal to the sons’ two-third share of the estate’s overall
administrative expenses. In its calculations, the superior court did not
address the reduction in mother’s sub-trust resulting from one son’s
prejudgment disbursement of $75,000 and the prepayment of $128,400 for
attorney fees and costs.
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Decision of the Court
¶14 Daughter timely appealed. This court has jurisdiction under
article VI, section 9, of the Arizona Constitution, and A.R.S. §§ 12-120.21.A.1
and -2101.A.1.
ANALYSIS
¶15 Daughter argues she did not violate the forfeiture clause in
father’s will or the first amendment. She also raises several issues about the
interpretation and application of the controlling documents to mother’s and
father’s sub-trusts.
¶16 Daughter also disputes the superior court’s mathematical
calculations about two prejudgment disbursements: (1) an unreimbursed
prejudgment $75,000 distribution to one son; and (2) $128,400 in attorney
fees and costs. Those disbursements, totaling $253,400, reduced the net
value of the monies in both sub-trusts, and the superior court did not take
them into account when determining daughter’s final share.
¶17 This court reviews the superior court’s legal conclusions de
novo. In re Estate of Zaritsky, 198 Ariz. 599, 601, ¶ 5 (App. 2000). When this
court reviews findings entered after a bench trial, it views “the facts in the
light most favorable to upholding the [superior] court’s ruling.” Bennett v.
Baxter Grp., Inc., 223 Ariz. 414, 417, ¶ 2 (App. 2010). This court “will not set
aside the probate court’s findings of fact unless clearly erroneous, giving
due regard to the opportunity of the court to judge the credibility of
witnesses.” Id. A finding of fact is not clearly erroneous if substantial
evidence supports it. Castro v. Ballesteros-Suarez, 222 Ariz. 48, 51–52, ¶ 11
(App. 2009). This court does “not reweigh conflicting evidence” but rather
examines “the record only to determine whether substantial evidence
exists” to support the superior court’s ruling. In re Estate of Sibley, 246 Ariz.
498, 501, ¶ 13 (App. 2018) (quoting In re Estate of Pouser, 193 Ariz. 574, 579,
¶ 13 (1999)).
I. Whether daughter violated the forfeiture clause is irrelevant
because it does not apply to mother’s sub-trust.
¶18 Daughter argues she did not violate the forfeiture clause in
father’s will and his sub-trust. We agree. Most of daughter’s filings related
to sons’ handling of both sub-trusts, not their “validity or legal
effectiveness.” To the extent she did challenge the “validity or legal
effectiveness” of father’s documents, she prevailed in establishing her right
to distributions from mother’s sub-trust. Even so, sons’ arguments on the
forfeiture clause miss the mark because any violation would not impact
daughter’s share of mother’s sub-trust.
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A. Under the first amendment’s plain language, father’s sub-
trust rolled into mother’s sub-trust.
¶19 This case involves interpreting terms in a will, a trust, and a
trust amendment. “The rules of construction that apply in this state to
the interpretation of and disposition of property by will also apply as
appropriate to the interpretation of the terms of a trust and the disposition
of the trust property.” A.R.S. § 14-10112.
¶20 In construing a will or a trust, this court’s goal is to determine
the trustor’s intent. See In re Estate of King, 228 Ariz. 565, 567, ¶ 9 (App. 2012);
In re Estate of Zilles, 219 Ariz. 527, 530, ¶ 8 (App. 2008); In re Estate of Daley,
6 Ariz. App. 443, 447 (1967). Still, this court interprets a will or a trust
according to its terms. See KAZ Constr., Inc. v. Newport Equity Partners, 229
Ariz. 303, 305, ¶ 7 (App. 2012); In re Trust Estate of Will, 8 Ariz. App. 591,
594 (1968). When the language of a will or trust is plain, the court will not
look beyond the document’s four corners to determine the grantor’s
intent. See Zilles, 219 Ariz. at 530, ¶ 9; see also Pouser, 193 Ariz. at 579, ¶ 10(holding extrinsic evidence is inadmissible to contradict a will’s plain
language).
¶21 If a written instrument creates the trust, this court determines
the trustor’s intent from the express language of the instrument. State ex rel.
Goddard v. Coerver, 100 Ariz. 135, 141 (1966). This court “consider[s] the text
of the trust ‘as a whole and, when appropriate, the circumstances at the time
it was executed.’” Zilles, 219 Ariz. 530, ¶ 8 (quoting Pouser, 193 Ariz. at 578,
¶ 10 (interpreting a will)); see also Restatement (Third) of Trusts § 4 cmt. a
(2003) (noting a trustor’s intent is determined as of the time of creation of
the trust). To that end, this court considers the trust’s “general plan or
scheme.” See In re Estate of Gardiner, 5 Ariz. App. 239, 240 (1967). Even so,
this court must not go beyond the plain language of the trust “in an attempt
to give effect to what it conceives to have been” the trustor’s “actual intent
or motive.” Taylor v. Hutchinson, 17 Ariz. App. 301, 304 (1972).
¶22 With the above in mind, our analysis begins with the first
amendment’s direction to transfer father’s sub-trust into mother’s sub-trust
and ends with the family trust’s direction to distribute all assets in mother’s
sub-trust equally among the three surviving children. Because those
controlling documents are unambiguous, their plain language controls. See
Zilles, 219 Ariz. at 530, ¶ 9; see also Pouser, 193 Ariz. at 579, ¶ 10.
¶23 Sons concede father could not amend the terms of mother’s
sub-trust because it was irrevocable upon her death in 2012. As for the
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Decision of the Court
jewelry, sons agree father’s attempt to substitute the jewelry he owned for
any portion of what daughter was owed under the terms of mother’s
irrevocable sub-trust—such as ”the residences, investment and bank
accounts”—“arguably was beyond his discretion as Trustee and was
invalid.”
¶24 The same is true of the loan. The first amendment’s
unambiguous terms directed the trustee to add “[a]ll remaining principal
and undistributed income” in father’s sub-trust to mother’s sub-trust. As
such, the first amendment was consistent with the family trust, which
(upon father’s death) moved any “remaining principal and undistributed
income” from father’s sub-trust to mother’s sub-trust. The superior court
had to account for the value of the jewelry and the loan as assets in mother’s
sub-trust. And the three children were to divide mother’s sub-trust equally.
B. The forfeiture clause could not affect any distribution under
father’s and mother’s sub-trusts.
¶25 Sons argue daughter was disinherited from father’s estate and
his sub-trust when the superior court enforced the forfeiture clause against
daughter. As a result, sons assert, daughter could not take any share of the
funds transferred from father’s sub-trust into mother’s sub-trust. As
support, sons rely on father’s expressed intent to disinherit daughter in the
second amendment even though the superior court did not find that
document controlling.
¶26 Sons do not challenge the superior court’s finding the second
amendment was not controlling. Instead, they argue daughter is wrong in
saying the superior “court determined the Second Amendment to be
invalid,” and sons then argue this court should consider the second
amendment as an “additional ground[]” to support the superior court’s
ruling. To that end, they simply argue this court “should consider the
Second Amendment as valid to the extent it supports the probate court’s
[j]udgment.”
¶27 We conclude otherwise. Father’s intent in the non-controlling
second amendment cannot alter the plain language of the first amendment
and mother’s sub-trust. See Taylor, 17 Ariz. App. at 304 (holding court
cannot go beyond plain language “in an attempt to give effect to what it
conceives to have been” the trustor’s “actual intent or motive”). The same
is true to the extent sons argue this court should extend father’s intent to
disinherit anyone who violated the forfeiture clause. We cannot use father’s
intent to broaden the plain language of those controlling documents. See id.
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II. The superior court must address (1) the unreimbursed $75,000
distribution to one son; (2) the probate estate’s prepaid attorney
fees and costs; and (3) the $58,000 loan to daughter held in father’s
sub-trust and transferred to mother’s sub-trust.
¶28 Daughter raises three more issues. First, daughter argues one
son received an additional $75,000 distribution, which the superior court
did not include in the combined value of the sub-trusts. Second, daughter
argues the superior court made a similar error when it determined the total
value of the sub-trusts without adjusting for the $128,400 sons paid in
attorney fees and costs. Sons do not dispute these alleged errors, instead
they argue the errors make no difference. But the errors affect the total asset
value in mother’s sub-trust and thus the final distribution amounts. Sons
also argue daughter waived the errors, but evidence and daughter’s
argument at trial addressed the calculation error regarding the one son’s
unreimbursed $75,000 distribution, and the court’s error regarding attorney
fees did not arise until it entered judgment. Because daughter preserved the
issues in her opening brief, waiver does not apply. See Harris v. Cochise
Health Sys., 215 Ariz. 344, 349, ¶ 17 (App. 2007).
¶29 Third, daughter argues the superior court should not have
reduced her share of mother’s sub-trust by the $58,000 she owed on the
amount loaned her by her parents before they died. But when father’s sub-
trust rolled into mother’s sub-trust, the receivable became an asset in
mother’s sub-trust. See supra ¶ 25. As such, much like the $75,000 early
distribution one son owes mother’s sub-trust, mother’s sub-trust holds
daughter’s receivable as an asset transferred from father’s sub-trust. On
remand, the superior court also must count the receivable as an asset of
mother’s sub-trust.
III. The superior court must consider any award of attorney fees and
costs based on this decision.
¶30 Because daughter has prevailed on appeal, we reverse the
superior court’s award of attorney fees and costs and remand the issue to
the superior court to determine an appropriate award, if any, of attorney
fees and costs based on this decision.
IV. We decline to award attorney fees either to sons or to daughter but
award daughter her costs.
¶31 Sons ask for an award of attorney fees and costs on appeal
under A.R.S. § 12-349 (appeal lacks substantial justification, is brought to
harass, or unreasonably expands the proceedings) and ARCAP 25
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(frivolous appeal). Because daughter prevailed on appeal, we deny sons’
request.
¶32 Daughter seeks an award of attorney fees and costs on appeal
under A.R.S. § 14-11004.B. Subsection 14-11004.B gives this court discretion
to award “a party’s reasonable fees, expenses and disbursements.” This
court may make such an award if it relates to a “good faith defense or
prosecution . . . involving the administration of the trust, regardless of
whether the defense or prosecution is successful.” See A.R.S. § 14-11004.A.
In our discretion, we deny daughter’s request for attorney fees.
¶33 As the prevailing party, we award daughter her costs upon
compliance with ARCAP 21.
CONCLUSION
¶34 For the above reasons, we reverse and remand for further
proceedings consistent with this decision.
AMY M. WOOD • Clerk of the Court
FILED: AA
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