Weinstein v. Weinstein (In re Indenture of Trust Dated January 13)

Decision Date16 May 2014
Docket NumberNo. 2 CA–CV 2013–0117.,2 CA–CV 2013–0117.
Citation235 Ariz. 40,326 P.3d 307,686 Ariz. Adv. Rep. 35
PartiesIn 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.
CourtArizona Court of Appeals

235 Ariz. 40
326 P.3d 307
686 Ariz.
Adv. Rep. 35

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.

Court of Appeals of Arizona,
Division 2.

May 16, 2014.


[326 P.3d 310]


Munger Chadwick, P.L.C. By Mark E. Chadwick, Tucson, Counsel for Petitioner/Appellant/Cross–Appellee.

Lawrence E. Condit, Tucson, Counsel for Respondents/Appellees/Cross–Appellants.


OPINION

HOWARD, 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

[326 P.3d 311]

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.

¶ 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.

¶ 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

[326 P.3d 312]

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.” 1A.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 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 alsoGeorge 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.

¶ 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

[326 P.3d 313

assignments and is thus a valid spendthrift clause that prohibited any assignment of Milton's beneficial interest in the Trust. 4See§ 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 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...

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