Whiles v. Jones (In re Book)

• Decision Date: 06 June 2019
• Docket Number: No. 1 CA-CV 18-0296,1 CA-CV 18-0296
• Parties: In the Matter of: YVONNE BOOK, BRUCE REIGELSPERGER, KEVIN O'CONNELL TRUST BART V. WHILES, et al., Plaintiffs/Appellees/Cross-Appellants, v. GORDON KEITH JONES, et al., Defendants/Appellants/Cross-Appellees.
• Court: Arizona Court of Appeals

In the Matter of: YVONNE BOOK, BRUCE REIGELSPERGER, KEVIN O'CONNELL TRUST

BART V. WHILES, et al., Plaintiffs/Appellees/Cross-Appellants, v. GORDON KEITH JONES, et al., Defendants/Appellants/Cross-Appellees.

No. 1 CA-CV 18-0296

ARIZONA COURT OF APPEALS DIVISION ONE

June 6, 2019

NOTICE: NOT FOR OFFICIAL PUBLICATION.UNDER ARIZONA RULE OF THE SUPREME COURT111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Maricopa County

No. PB2014-070659

The Honorable Andrew G. Klein, Judge

AFFIRMED IN PART; VACATED IN PART; REMANDED

COUNSEL

Kenneth M. Rudisill Attorney at Law, Peoria

By Kenneth M. Rudisill

Counsel for Plaintiffs/Appellees/Cross-Appellants

Kile & Kupiszewski Law Firm, L.L.C, Scottsdale

By Stephen J. P. Kupiszewski, Emily B. Kile, Jennifer L. Kupiszewski,

Christina M. Stoneking

Co-Counsel for Defendants/Appellants/Cross-Appellees

The Law Office of Libby Banks, Scottsdale

By Libby Hougland Banks

Co-Counsel for Defendants/Appellants/Cross-Appellees

MEMORANDUM DECISION

Judge Kenton D. Jones delivered the decision of the Court, in which Acting Presiding Judge Maria Elena Cruz and Judge Jennifer B. Campbell joined.

JONES, Judge:

¶1 At issue in this case is whether a settlement agreement entered into between co-trusteesGordon L. Jones(Gordon), deceased, and Gordon Keith Jones(Keith)(collectively, the Joneses) and four primary beneficiaries of a trust is binding upon successor trustees when the contingent beneficiaries were not parties to the settlement agreement.Keith, along with his wife, family, and Gordon's estate (collectively, Appellants), appeal the trial court's order denying their petition to enforce the settlement agreement against Bart Whiles and Clark Leuthold(collectively, the Successor Trustees).Both parties appeal the court's order denying their requests for an award of attorneys' fees.For the following reasons, we affirm the order denying the petition to enforce the settlement agreement, vacate the order denying attorneys' fees, and remand for further proceedings.

FACTS AND PROCEDURAL HISTORY

¶2 In 2008, Kevin O'Connell established a revocable trust (the Trust), in which he designated $2.1 million to be paid in specific cash gifts to four long-time employees (collectively, the Primary Beneficiaries) within "thirty days from the Trustor's death."The remainder of the Trust assets were to be distributed to Saint Leo University and Marquette University (collectively, the Contingent Beneficiaries) in designated percentages.

¶3 O'Connell died in 2011 and Gordon assumed his designated role as trustee.About a month later, Gordon appointed his son, Keith, asco-trustee but did not distribute the four specific gifts to the Primary Beneficiaries.In 2014, two of the four Primary Beneficiaries filed a complaint against the Joneses, alleging they breached their fiduciary duties through waste and self-dealing.In this, the 2014 Case, the Primary Beneficiaries sought removal of the Joneses as trustees and an award of damages.By the time the 2014 Case settled, another of the Primary Beneficiaries had intervened.And although the fourth did not participate in the litigation or negotiations, he signed the settlement agreement after it had been reduced to writing.The Contingent Beneficiaries appeared through counsel but did not participate in, nor become signatories to, the settlement agreement.

¶4 The terms of the settlement, as relevant here, provided that: (1) the signatories were settling "all claims known and unknown, liquidated and unliquidated, foreseen and unforeseen that would in any way arise out of the claims and disputes that have been asserted in [the 2014 Case],"(2)"[m]utual releases w[ould] be given by the beneficiaries to the Trust, and the releases w[ould] inure to the benefit of Gordon and Keith individually, personally and in their fiduciary capacities,"(3) releases would "also be given to all of the parties' successors, assigns and attorneys,"(4) the Joneses would resign as co-trustees and be replaced by the Successor Trustees, and (5) the Primary Beneficiaries would receive $50,000 from a company that had received a $400,000 loan from the Trust, and another $5,000 each from Gordon personally.Finally, the Joneses waived "any Trustee's fees, Trust administrative expenses, consulting expenses, or any other monies they believe[d] may be due them from the Trust."The agreement also included specific language acknowledging that the Contingent Beneficiaries were not parties to the settlement and were not bound by it.

¶5 In December 2015, the Successor Trustees filed a complaint against the Joneses and several other parties, alleging breach of fiduciary duty, fraud, conspiracy to defraud the Trust and beneficiaries, and aiding and abetting a conspiracy to defraud.In response to this, the 2015 Case, Appellants filed a petition to enforce the settlement agreement and dismiss the 2015 Case.The trial court denied the petition to enforce and ordered the parties to bear their own attorneys' fees and costs.Appellants timely appealed the final judgment, and the Successor Trustees timely cross-appealed the order denying attorneys' fees.We have jurisdiction pursuant to Arizona Revised Statutes (A.R.S.)§§ 12-120.21(A)(1)¹ and -2101(A)(1).

DISCUSSION

I.Standard of Review

¶6 General principles of contract law govern determinations concerning the validity, interpretation, and scope of settlement agreements.Emmons v. Superior Court, 192 Ariz. 509, 512, ¶ 14(App. 1998)(citingHisel v. Upchurch, 797 F. Supp. 1509, 1517(D. Ariz.1992)).We review de novo whether a settlement agreement is enforceable.SeeEstate of DeCamacho ex rel. Guthrie v. La Solana Care & Rehab, Inc., 234 Ariz. 18, 20, ¶ 9(App. 2014)(citations omitted).We will affirm the trial court's decision if it is correct for any reason.U.S. Insulation, Inc. v. Hilro Constr. Co., 146 Ariz. 250, 256(App.1985)(citingGary Outdoor Advert. Co. v. Sun Lodge, Inc., 133 Ariz. 240, 242(1982), andRancho Pescado, Inc. v. Nw. Mut. Life Ins., 140 Ariz. 174, 178(App.1984)).

II.The Primary Beneficiaries Sued the Joneses Both as Individuals and in Their Representative Capacities in the2014 Case.

¶7 The Successor Trustees argue the Joneses were only sued as individuals in the 2014 Case, not in their capacities as co-trustees, and therefore had no authority to bind the Successor Trustees to the terms of the settlement agreement.Generally, a common-law trust is not considered a legal entity capable of suing or being sued; therefore, any suit involving the trust must be brought by or against its trustee.See, e.g., Millennium Square Residential Ass'n v. 2200 M St. L.L.C., 952 F. Supp. 2d 234, 243(D.C. Cir.2013)(citations omitted);see also76 Am. Jur. 2dTrusts§ 601(2019)("In most jurisdictions, a trust is not an entity separate from its trustees, and cannot sue or be sued in its own name, and therefore, the trustee, rather than the trust, is the real party in interest in litigation involving trust property.").Additionally, if a trustee breaches his fiduciary duties, he may be personally liable for the resulting loss to the trust assets.Shriners Hosps. for Crippled Children v. Gardiner, 152 Ariz. 527, 528(1987)(citations omitted).Thus, depending upon the nature of the claims and remedies sought by beneficiaries, a trustee may be sued in a representative capacity, as an individual, or both.

¶8 The record here reflects that the Joneses were sued both as individuals and in their representative capacities in the 2014 Case.The Successor Trustees note that the 2014 Case caption only listed the defendants as individuals, rather than "as trustees," and therefore assert the Trust was not a party to the settlement.However, a party is not required to allege "a party's capacity to sue or be sued" or "authority to sue or be sued in a representative capacity" in a pleading unless it is necessary to establish jurisdiction.Ariz. R. Civ. P. 9(a);see alsoAriz. R. ProbateP. 3(A)(stating the Arizona Rules of Civil Procedure apply to probate proceedings "[u]nless otherwise provided . . . or inconsistent with" the Arizona Rules of Probate Procedure)."The rationale behind this rule is that the nature of the plaintiff's cause of action can be determined from the body of the complaint."Colo. Springs Cablevision, Inc. v. Lively, 579 F. Supp. 252, 255(D. Colo.1984)(analyzing the analogous federal rule);see alsoEdwards v. Young, 107 Ariz. 283, 284(1971)("Because Arizona has substantially adopted the Federal Rules of Civil Procedure, we give great weight to the federal interpretations of the rules.")(citingJenney v. Ariz. Express, Inc., 89 Ariz. 343, 349(1961), andHarbel Oil Co. v. Steele, 80 Ariz. 368, 373-74(1956)).

¶9 In fact, the nature of the 2014 Case is easily ascertained from the allegations in the complaint, which refers to the Joneses collectively as "Trustees" or, individually, as "Successor Trustee" or "Co-Trustee" throughout.The complaint also contains averments as to what the Primary Beneficiaries should have received as "principal beneficiaries of the Trust" and claims as to what the then-acting trustees failed to do or did improperly.The Primary Beneficiaries sought remedies relating to the management of the Trust — including the removal of the Joneses as co-trustees, or alternatively, the appointment of a special fiduciary — as well as monetary damages for the breach of fiduciary duty that arose from the Joneses' positions as co-trustees.The complaint also specifically sought judgment against "defendantTrustees."Thus, it is clear from the body of the complaint that the Joneses were sued both as individuals and in their representative capacities.

¶10 The Successor Trustees nonetheless argue that even if the caption of the complaint is not controlling as to the Joneses' role, the acceptance of service demonstrates that they appeared in the litigation only in their individual...