Marsh v. Coles
| Decision Date | 10 November 2015 |
| Docket Number | No. 1 CA–CV 14–0407.,1 CA–CV 14–0407. |
| Citation | 238 Ariz. 398,361 P.3d 383,726 Ariz. Adv. Rep. 29 |
| Parties | Mary MARSH, individually; Achen Contractors, LLC, an Arizona Limited Liability Company; Achen–Gardner Engineering, LLC, an Arizona Limited Liability Company; Arena I Limited Partnership, an Arizona limited partnership; John Arena, as Trustee of the Farm Managers, Inc., PSP & T; Sylvia Arena, individually; Merle R. Arlen, as Trustee of the Merle and Norma Arlen Family Trust Dated January 6, 1997; Merle R. Arlen, individually and as the owner and beneficiary of the Merle R. Arlen IRA Rollover; Thomas Berlinger and Catherine Berlinger, husband and wife; Bruce Dennis Buckley and Alivia Virginia Buckley, as Trustees of the Bruce Dennis Buckley and Alivia Virginia Buckley Revocable Living Trust Dated June 4, 1985; Bruce D. Buckley, individually and as the owner and beneficiary of the Bruce Dennis Buckley IRA; Thomas A. Bush and Joanne M. Bush, husband and wife; C & D Trading, Inc., a Nevada corporation; Karen Rudel Cleeves–Estabrook, as Trustee of the Karen Rudel Cleeves–Estabrook Revocable Trust dated May 23, 2002; Melvin L. Dunsworth Jr., as Trustee of The Revocable Living Trust of Melvin Dunsworth, Jr. Dated December 23, 2003; Energetics, Inc., an Arizona Corporation; John Greenbank, as trustee for Energetics, Inc. Restated Profit Sharing Plan; Valentine Eytan, individually; Douglas and Sharlene Gardner, individually and as husband and wife; Douglas Gardner, individually and as the owner and beneficiary of the Douglas D. Gardner IRA; Sharlene Gardner, individually and as the owner and beneficiary of the Sharlene K. Gardner IRA; Wendell J. Gardner, individually and as the owner and beneficiary of the Wendell J. Gardner IRA; Wendell J. Gardner and Pauline M. Gardner, as Trustees of the WPG Revocable Trust dated May 23, 2002; Gardner Capital Partners, LP, an Arizona limited partnership; Adam Gilburne and Ronda Gilburne, husband and wife; Adam Gilburne, as Trustee for the Adam and Rhonda Gilburne Family Trust U/T/A Dated June 20, 2006; Ronda Gilburne, as Trustee for the Adam Gilburne Irrevocable Trust for the Benefit of Jillian Gilburne; Golden Lending Group, LLC, an Arizona limited liability company, f/k/a Penny Hardaway Investments, LLC; Bonnie Greenbank, individually and as the owner and beneficiary of the Bonnie Greenbank IRA; Bonnie Greenbank, as Trustee for Bonnie L. Greenbank Family Trust; Thelma A. Gross, Susan L. Arenson and Marc Amdur Gross as co-trustees of the Thelma Gross Trust dated March 11, 2014; Thelma A. Gross, Susan L. Arenson, and Marc Amdur Gross as co-trustees of the T & J Gross Trust; Thelma Gross, individually; Delery Guillory and Kathy Guillory, husband and wife; Delery Guillory, individually; Kathy Guillory, individually and as the owner and beneficiary of the Kathy Guillory IRA account for which the Colonial Trust Company is Custodian and the Kathy Guillory IRA for which the First Trust of Onaga is Custodian; Investor Clout, an Arizona Partnership; JSM Family Ventures, LLLP, an Arizona Limited Liability Limited Partnership; Alig. Khan, as Custodian for J.S. Khan; Lisa Khan, as Custodian for A.E. Khan, under the Uniform Gift to Minors Act; Lisa Khan, as Custodian for A.N. Khan, under the Uniform Gift to Minors Act; Lisa Khan, as Custodian for T.M. Khan, under the Uniform Gift to Minors Act; Ali Khan and Lisa Khan, husband and wife; Evalina Layne, as Trustee of the Wesley R. and Evalina O. Layne Family Trust; Evalina Layne, individually and as the owner and beneficiary of the Evalina Layne IRA; Leah L. Lewis, as Trustee of the Leah L. Lewis Trust Dated February 23, 2000; Leah L. Lewis, individually and as the owner and Beneficiary of the Leah L. Lewis IRA; William C. Lewis, as Trustee of the William C. Lewis Trust Dated August 1,1989, as amended; Barbara Lukavsky, individually; Lynton R. Leslie; as Trustee of the Lynton R. Leslie and Rae D. Leslie Revocable Trust; Stephen Mayne and Linda Mayne, husband and wife; Mayne and CompanyDefined Benefit Pension Plan; Donna J. McGregor, individually; Chuck Niday, as Trustee of the Ross Verne Family Trust, a Revocable Living Trust, dated January 18, 2007, and any supplements thereto; Jerome Nosanchuk, individually; Joshua Nosanchuk and Patricia L. Murphy, husband and wife; Sara Nosanchuk, individually; Richard J. Prinz and Catherine T. Prinz, husband and wife; Yvonne Quintal, individually; Linda Reeves, as Trustee for the Linda Reeves Trust; RMA Rental and Leasing LLP, an Arizona limited liability partnership; Robert Roden, as Trustee of the Robert G. Roden Living Trust; Marcelo Romano, individually and as the owner and beneficiary of the Marcelo A. Romano IRA; The Marcelo Romano and Jeanette Romano Family Limited Liability Partnership, Number One, an Arizona limited liability partnership; David Rosenthal, individually; Morton M. Scult, as Trustee of the Morton M. Scult, PC Money Purchase Pension Plan; Sumar Investment Company, an Arizona general partnership; Robert L. Taylor and Bonnie Taylor, as Trustees of the Taylor Loving Trust; Robert L. Taylor, as Trustee of the Robert L. Taylor, DDS, PC Profit Sharing Plan & Trust; Richard K. Underwood, as Trustee of the Richard K. Underwood Revocable Trust Dated October 31, 1995, as Amended; John Vinson and Taeko Vinson, as Trustees for the John Charles Vinson Family Trust, dated December 3, 1984, as amended; David Wacknov, individually and as the owner and beneficiary of the David Wacknov IRA and the David Wacknov Roth IRA; Christine Wacknov, individually and as the owner and beneficiary of the Christine Wacknov IRA and the Christine Wacknov Roth IRA; Don Watkins and Christine Wacknov, individually and as joint ary 3, 1993; WMS Fixed Income Fund I, LLC, an Arizona limited liability company; WPG Family Limited Partnership, a Colorado Limited Partnership; Diana Wykes, individually; David C. Zanecki and Jody J. Zanecki, husband and wife and as joint tenants with right of survivorship; David C. Zanecki, individually and as owner and beneficiary of the David C. Zanecki IRA; Clara B. Zaniecki, an individual, by and through her attorney-in-fact, David C. Zanecki, Plaintiffs/Appellants, v. Ashley COLES, individually and as Trustee of the Ashley Coles Family Trust; Francine L. Coles, individually and as conservator of Z.A. Coles and S.B. Coles, minors; and Haley Brooke Coles; Francine L. Coles, as Trustee of the Coles Children's Irrevocable Trust, U/T/A dated March 3, 2010, an Arizona Trust, for the benefit of Z.A. Coles; Francine L. Coles, as Trustee of the Coles Children's Irrevocable Trust, U/T/A dated March 3, 2010, an Arizona Trust, for the benefit of Haley B. Coles; Francine L. Coles, as Trustee of the Coles Children's Irrevocable Trust, U/T/A dated March 3, 2010, an Arizona Trust, for the benefit of Samuel B. Coles; Francine L. Coles, as Trustee of the FLC Revocable Trust dated July 11, 2003, an Arizona Trust, as amended; FHZS Family LLC, an Arizona limited liability company; DG Resorts, LLC, an Arizona limited liability company; and NLV Holdings, LLC, an Arizona limited liability company, Defendants/Appellees. |
| Court | Arizona Court of Appeals |
Smith LC By Steven C. Smith, Richard R. Thomas, Stephen C. Biggs, Phoenix, Co–Counsel for Plaintiffs/Appellants.
The Spence Law Firm, LLC By G. Bryan Ulmer, III, Mel C. Orchard, III, Jackson, Wyoming, Co–Counsel (Pro Hac Vice) for Plaintiffs/Appellants.
Warner Angle Hallam Jackson & Formanek, PLC By Jerome K. Elwell, J. Brent Welker, Phillip B. Visnansky, Phoenix, Counsel for Defendants/Appellees Francine L. Coles; Haley Brooke Coles; FHZS Family LLC; DG Resorts, LCC; and NLV Holdings, LLC.
Kercsmar & Feltus PLLC By Todd Feltus, Julia A. Guinane, Scottsdale, Counsel for Defendant/Appellee Ashley Coles.
¶ 1 The issue in this appeal is whether investors may obtain a constructive trust on life insurance proceeds received by the policy beneficiaries after the death of the insured when the insured allegedly acquired the insurance policies with funds wrongfully obtained through an illegal enterprise and a pattern of unlawful activity under state racketeering statutes. We hold a provision in Arizona's racketeering statute protecting innocent third parties bars the constructive trust requested by the investors. We therefore affirm the superior court's judgment in favor of the beneficiaries.
¶ 2 From at least 2003 until his death in 2008, Scott Coles participated in an illegal enterprise that, through the unlawful sale of real-estate backed securities and money laundering, wrongfully deprived the plaintiff/appellant investors (“Investors”) of more than $127 million. The Investors alleged Scott Coles' “confederates” in this illegal enterprise included Greenberg Traurig, LLP, a law firm, and an attorney employed by the firm (“Lawyer Defendants”); Mayer Hoffman McCann, P.C., an accounting and financial auditing firm, and associated entities (“Auditor Defendants”); and Hirsch & Shah, LLC, an accounting firm. According to the Investors, Scott Coles and these “confederates” (collectively, unless specified by name, the “Other Defendants”) comprised “an association-in-fact, although not a legal entity.”
¶ 3 Scott Coles used proceeds from the illegal enterprise to acquire and maintain life insurance policies that, upon his death, paid out “more than $40 [million]” to his widow, Ashley Coles; his ex-wife, Francine Coles; one of his daughters; and a trust for the benefit of his children, the Coles Children's Irrevocable Trust. Francine Coles formed three limited liability companies to acquire assets with the life insurance proceeds she received, and also transferred $2,520,000 of the proceeds received by the Children's Irrevocable Trust to her personal trust, the FLC Revocable Trust. We refer to the beneficiaries of Scott Coles' life insurance policies and Francine Coles' limited liability companies and personal trust as the “Coles Defendants,” and we...
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