In re Estate of Newman

• Decision Date: 12 June 2008
• Docket Number: No. 1 CA-CV 07-0373.,1 CA-CV 07-0373.
• Citation: In re Estate of Newman, 196 P.3d 863, 219 Ariz. 249 (Ariz. App. 2008)
• Parties: In the Matter of the ESTATE OF Celia J. NEWMAN, Deceased. Adina M. Newman, as Personal Representative of the Celia J. Newman Estate and Successor Co-Trustee of the Celia J. Newman Trust, Petitioner/Cross-Defendant/Appellee, and Ilana Newman, Co-Trustee of the Celia J. Newman Trust, Third-Party Defendant/Appellee, v. Mordecai M. Newman, Respondent/Cross-Claimant/Third-Party Plaintiff/Appellant.
• Court: Arizona Court of Appeals

196 P.3d 863

219 Ariz. 249

In the Matter of the ESTATE OF Celia J. NEWMAN, DeceasedAdina M. Newman, as Personal Representative of the Celia J. Newman Estate and Successor Co-Trustee of the Celia J. Newman Trust, Petitioner/Cross-Defendant/Appellee, and Ilana Newman, Co-Trustee of the Celia J. Newman Trust, Third-Party Defendant/Appellee, v.Mordecai M. Newman, Respondent/Cross-Claimant/Third-Party Plaintiff/Appellant.

No. 1 CA-CV 07-0373.

Court of Appeals of Arizona, Division 1, Department B.

June 12, 2008.

As Amended July 17, 2008.

Review Denied October 28, 2008.

Fennemore Craig, P.C.By Louis F. Comus, Jr., Roger T. Hargrove, Alexandra R. Arpad, Phoenix, Attorneys for Appellees/PetitionersAdina Newman as Personal Representative and Co-Trustee, and Ilana Newman as Co-Trustee.

Marlene Appel, Attorney at Law, Phoenix, Attorney for AppelleeAdina M. Newman Individually.

Kenneth L. Abrams, PC By Kenneth L. Abrams, Phoenix, Attorney for AppelleeAdina M. Newman as Personal Representative.

Snell & Wilmer, L.L.P.By Kevin J. Parker, Phoenix, Attorneys for AppellantMordecai M. Newman.

OPINION

BARKER, Judge.

¶ 1 In this probate proceeding, we are asked to review the trial court's division of assets among the decedent's three children.

Facts and Procedural Background

¶ 2Celia Newman("Celia") died on August 30, 2004.She was survived by three children, Ilana Newman("Ilana"), Adina Newman("Adina"), and Mordecai Newman("Max").Pursuant to the terms of Celia's will, Adina was appointed personal representative of her estate.Adina and Ilana were also appointed trustees of the trust owned by Celia prior to her death.

¶ 3We consider the facts in the light most favorable to sustaining the trial court's judgment.Pelletier v. Johnson,188 Ariz. 478, 480, 937 P.2d 668, 670(App.1996).While administering Celia's estate, Adina became aware of several questionable financial transactions involving Celia and Max that had occurred in the years preceding Celia's death, while she was physically and mentally impaired.Specifically, in late October 2002, Max had used $93,000 of Celia's money as a down payment toward the purchase of a home in Scottsdale.Max testified that he left his job in San Francisco and moved to Phoenix to help care for Celia.Max claimed that he and Celia had intended to live in the house, which they owned as joint tenants with rights of survivorship.However, Celia never moved into the Scottsdale home.Max's testimony was also inconsistent with that of Celia's sister-in-law, Sarah Newman, as to when he moved into the home.Before trial, he testified in a deposition that he did not move in until after Celia's death.Sarah Newman testified that he moved in soon after the home was purchased.

¶ 4 Max also had withdrawn $185,000 in late August 2004 and $117,800 in April 2004 from Celia's Morgan Stanley Individual Retirement ("IRA") account.He deposited these funds into a bank account that he shared with his mother with rights of survivorship.Though he later claimed to be unaware that he would have ownership of these funds after Celia died, the trial court found his testimony to be inconsistent and not credible, given that he had been trained as a financial advisor at Morgan Stanley.Max claimed that some of the $185,000 was used for Celia's expenses, although he kept no records that would allow the court to determine whether some of the funds were used for his own benefit.In October 2003, Max also had acquired a power of attorney to act on his mother's behalf.He used this power to sign his mother's name to various financial documents, at times without noting that he was signing on her behalf.A few days before his mother's death, Max drafted and signed documents purporting to disinherit Adina from the trust and revoke the designation of Adina as a personal representative of the trust.

¶ 5 As a co-trustee and personal representative of her mother's estate, after learning of these transactions, Adina asked Max to return the $185,000 to Celia's IRA in order to avoid unnecessary income taxes.He refused.She also asked that he cooperate with the administration of the estate by providing additional information about his role in Celia's financial affairs.Max provided some documents, but otherwise failed to comply.He also attempted to remove Adina as a personal representative and trustee of his mother's estate, filing a Petition to Remove in the trial court.

¶ 6 In response to Max's lack of cooperation, Adina brought the following claims against him: (1) return of property and documents in aid of administration (Arizona Revised Statutes("A.R.S.")section 14-3709), (2) breach of fiduciary duty/constructive trust, (3) breach of statutory duty under Arizona's Vulnerable Adults Statute(A.R.S. § 46-456), (4) conversion,¹ and (5) reformation.In response, Max filed a counterclaim accusing Adina of defamation and wrongful recording of lis pendens.He also filed a counterclaim for breach of fiduciary duty against both Ilana and Adina.

¶ 7The trial court set trial only on Adina's Petition to Recover Assets and Max's Petition to Remove Co-Trustee.Though not expressly stated, the result of the court's order meant that the other claims were reserved for subsequent proceedings or disposition.Prior to trial, Max moved to transfer the case to the Probate Presiding Judge.He also demanded a jury trial.In addition, he moved to exclude his sisters' expert witnesses, claiming that they had been untimely disclosed.The trial court ultimately denied all these requests.

¶ 8 After a seven-day trial, the trial court found that Max failed to meet applicable fiduciary standards and that he was liable to Celia's estate for sanctions and for the benefits he received prior to her death.The trial court entered one judgment for $185,000, reflecting the amount of money Max withdrew from Celia's IRA in August 2004.The court also entered a second judgment in the amount of $518,106.Based on the description in the proposed form of judgment, the trial court arrived at $518,106 by adding $93,000 for the Scottsdale house down payment, $278,000 for double damages pursuant to A.R.S. § 14-3709(D), $61,050 for tax damages, and $86,056 for prejudgment interest (calculated at 10% per annum) based on the corresponding amounts set forth in Adina's proposed form of judgment.The double damages were calculated by adding $93,000 (for the Scottsdale house down payment) and $185,000 (the IRA withdrawal).The trial court also left open further unspecified amounts to be determined by an accounting.

¶ 9 Pursuant to Arizona's Vulnerable Adults Statute, A.R.S. § 46-456, the court also found that Max was required to forfeit the benefits he would have received under Celia's will.Since Celia's estate poured over into her trust, the court also found that Max forfeited all benefits accruing to the trust after Celia's death, while leaving intact benefits due Max under the trust independent of the will.

¶ 10 Max timely appealed.We have jurisdiction pursuant to A.R.S. § 12-2101(B)(2003).²

Discussion

¶ 11 On appeal, Max raises eleven issues, which we have grouped into three major categories: (1) issues relating to the merits of the trial court's decision, (2) issues relating to the trial court's decisions regarding scheduling and the mode of trial, and (3) issues relating to the trial court's evidentiary rulings on the admissibility of expert opinions.We discuss each in turn.

I.The Merits

¶ 12 Max argues that the trial court misinterpreted two statutes(A.R.S. §§ 14-3709,46-456), erred by refusing to appoint an independent trustee and representative, and made clearly erroneous findings of fact.

¶ 13We apply a de novo standard of review to the trial court's legal conclusions.P.M. v. Gould,212 Ariz. 541, 544, ¶ 12, 136 P.3d 223, 226(App.2006).However, the trial court's "factual findings must be accepted on appeal unless they are `clearly erroneous.'"Davis v. Zlatos,211 Ariz. 519, 523, ¶ 18, 123 P.3d 1156, 1160(App.2005)(quotation omitted).

A.A.R.S. § 14-3709

¶ 14This case presents the narrow question of whether a necessary prerequisite to an award of double damages under A.R.S. § 14-3709(D) is a prior court order with regard to the property at issue.Max argues that the language of the statute requires such an order.We agree.

¶ 15 The first step in statutory construction is to "look to the language of the statute itself.Our chief goal is to ascertain and give effect to legislative intent."Scottsdale Healthcare, Inc. v. Ariz. Health Care Cost Containment Sys. Admin.,206 Ariz. 1, 5, ¶ 10, 75 P.3d 91, 95(2003)(citation omitted).We must consider "each word, phrase, clause, and sentence . . . so that no part will be void, inert, redundant or trivial."Williams v. Thude,188 Ariz. 257, 259, 934 P.2d 1349, 1351(1997)(quotations omitted, emphasis removed).

¶ 16 It is impossible to appropriately consider the double-damages provision in subsection (D) without considering subsections (A), (B), and (C).³A.R.S. § 14-3709.We note first that subsection (A) provides for a personal representative to "take possession or control of[ ] the decedent's property."Id.It further provides that "[t]he request by a personal representative for delivery of any property possessed by an heir or devisee is conclusive evidence, in any action against the heir or devisee for possession of the property, that the possession of the property by the personal representative is necessary for purposes of administration."Id.Subsection (A) further provides that "[t]he personal representative may maintain an action to recover possession of property or to determine its title."Id.

¶ 17 Subsections (B), (C) and (D) of § 14-3709 pertain to circumstances when a personal representative, or other interested person, believes that a person has, among other things, concealed, embezzled, conveyed or disposed of property of the decedent.Subsection (B)...