Opinion
1 CA-CV 12-0198
02-28-2013
RICHARD PEEL, Plaintiff/Appellant Cross-Defendant, v. ROBERT PEEL and JANE DOE PEEL, husband and wife, beneficiaries of the Peel Family Trust, Defendants/Appellees Cross-Claimants.
William B. Fortner Attorney for Plaintiff/Appellant Cross-Defendant The Ledbetter Law Firm, PLC By James E. Ledbetter Kelley J. Ruda Attorneys for Defendants/Appellees Cross-Claimants
NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED
EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24
MEMORANDUM DECISION
(Not for Publication -
(Rule 28, Arizona Rules of
Civil Appellate Procedure)
Appeal from the Superior Court in Yavapai County
Cause No. P1300CV200901585
The Honorable Patricia A. Trebesch, Judge Pro Tempore
AFFIRMED
William B. Fortner
Attorney for Plaintiff/Appellant Cross-Defendant
Prescott
The Ledbetter Law Firm, PLC
By James E. Ledbetter
Kelley J. Ruda
Attorneys for Defendants/Appellees Cross-Claimants
Cottonwood
KESSLER, Judge ¶1 Appellant Richard Peel ("Richard") appeals the trial court's judgment for sanctions against him and in favor of Appellees Robert ("Bob") and Ann Peel (collectively "the Peels"), the denial of sanctions against the Peels and the dismissal of his complaint. For the following reasons, we affirm.
The trial court also ordered Richard's trial counsel to pay $2,500.00 as sanctions. Although Richard's trial counsel is also representing Richard on appeal, counsel has not identified himself as an appellant in the docketing statement or case caption, thus, counsel has not appealed the judgment entered against him personally. We amend the caption to reflect only those parties to this appeal and order the use of this caption for all further proceedings on appeal.
FACTUAL AND PROCEDURAL HISTORY
¶2 Bob and Richard Peel are brothers and the beneficiaries of two trusts, both named the Peel Family Trust, formed by their parents, Robert Dean Peel and Martha Mae Peel ("Mother"). One is an irrevocable trust and the trustee had sole discretion to make distributions to Richard or Bob, as needed, during their lifetime. Richard's complaint only references the irrevocable trust. ¶3 The second trust is a revocable trust ("the revocable trust"). The revocable trust provides that Bob receive his one- half share outright, while Richard's one-half share is held in trust and is distributed to him at the sole and absolute discretion of the trustee. Bob was the trustee of the revocable trust. ¶4 Mother died in June of 2009. Both brothers and their wives met with the financial advisor handling the investments for the trusts in July of 2009. At that time, all of the assets of the trusts and their values were disclosed to the brothers and their wives. At this meeting, Bob and Richard agreed to how the complex trusts' assets would be handled. Neither Richard, nor his wife, Mary Lou, requested any documentation during this meeting. ¶5 A few months later in September, Richard's attorney requested information from the Peels regarding the assets of the irrevocable trust. Then in October, Richard, Mary Lou and Darla Panning, former trustee of the irrevocable trust, filed a complaint against the Peels alleging the conversion of assets of the irrevocable trust and demanding an accounting. The Peels filed an answer despite the fact that they had not been served with the complaint. ¶6 In January of 2011, the trial court held a settlement conference. At the settlement conference, the parties agreed that: the successor trustee, Michael Holdsworth ("Holdsworth" or "successor trustee") would provide a complete accounting to Richard; Richard would dismiss the claim for violation of fiduciary duties; and, Bob would give Richard all of Mother's coins. The court retained jurisdiction "to deal with any breach revealed by the above ordered accounting." ¶7 Thereafter, the parties each filed motions for sanctions against the other for failure to abide by the terms of the settlement agreement. Richard claimed the accounting was deficient. The Peels complained that Richard had not dismissed the fiduciary claim, as promised, even though he had received the accounting and the coins. The trial court ordered that it would consider both parties' motions for sanctions at trial. ¶8 At trial, Richard claimed that a vehicle which Bob said Mother gifted to him before her death was trust property, and that Bob did not give him all of Mother's coins as required by the settlement agreement. However, Richard did not disclose his suspicion of conversion of the vehicle until two weeks before trial and did not disclose the issue regarding the coins until the day of trial. The trial court dismissed Richard's conversion claim for untimely disclosure. ¶9 Richard also complained that Ann received approximately $10,000 as a fee in connection with the sale of Mother's Texas home, even though Ann was not a realtor. In his view, this was a conversion of trust assets. Finally, Richard claimed that numerous personal items, such as jewelry, a cuckoo clock, book and figurine collections owned by Mother at her death were converted as they did not appear in the accounting. The trial court ruled that the realtor fee and the personal property were part of the probate estate opened in Texas because the house had not been placed into the trust. As such, both claims should have been litigated in the Texas probate, and the trial court had no jurisdiction to hear either claim. Additionally, the trial court noted that Richard had provided no disclosure regarding the items of personal property prior to the day of trial. ¶10 With the conversion claim dismissed, the only remaining claim was that Bob had not provided Richard with a complete accounting of the trusts. The trial court dismissed this claim because Bob was no longer the trustee of the revocable trust. ¶11 Next, in light of the court's ruling that she had no jurisdiction over items subject to the Texas probate, Richard withdrew his motion for sanctions. The trial court later denied the Peels' motion for sanctions. ¶12 After the trial, the Peels filed a second motion for sanctions under Arizona Rules of Civil Procedure ("Rule") Rule 37(c) and Arizona Revised Statutes ("A.R.S.") section 12-349 (Supp. 2012) on the grounds that Richard appeared for trial unprepared and without having disclosed the substance of his claims and a witness prior to trial as required by Rule 26.1. ¶13 Richard responded and filed a counter motion for sanctions on the grounds that the Peels had not timely provided an accounting or relevant information in their possession, and had refused to provide an itemized statement of their attorneys' fees. ¶14 Thereafter Richard filed two similar motions for sanctions less than one week apart: the first in connection with his motion for reconsideration and, the second in connection with his opposition to the Peels' application for attorneys' fees. The trial court denied these duplicative motions for sanctions and awarded attorneys' fees to the Peels and against Richard and his attorney for failing to make proper disclosure and unreasonably expanding and delaying the proceedings in the absence of any legal or factual support. ¶15 Richard timely appealed the judgment in favor of the Peels. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(1) (Supp. 2012).
In addition, the parties' parents formed a charitable remainder trust.
Thus, the only remaining issue was the Peels' cross-complaint regarding the irrevocable trust's forfeiture provision and the Peels' motion for sanctions against Richard. During his trial testimony, Bob dismissed his cross-complaint.
We cite the current version of the applicable statute because no revisions material to this decision have since occurred.
ISSUES ON APPEAL
¶16 Richard appeals the superior court's: (1) failure to award sanctions against the Peels; (2) award of sanctions against him; and (3) dismissal of the complaint based on the terms of a settlement agreement. He also argues that the trial court's ruling permitted a trustee to avoid his fiduciary duties.
DISCUSSION
¶17 The decision to award attorneys' fees as a sanction for discovery violations is left to the sound discretion of the trial court and we will not disturb that decision absent a clear abuse of discretion. Roberts v. City of Phoenix, 225 Ariz. 112, 121-22, ¶ 34, 235 P.3d 265, 274-75 (App. 2010). The evidence is viewed in a manner most favorable to sustaining the award of sanctions. Heuisler v. Phoenix Newspapers, Inc., 168 Ariz. 278, 284, 812 P.2d 1096, 1102 (App. 1991). However, the application of a statute is a question of law subject to de novo review. Phoenix Newspapers, Inc. v. Dep't of Corr. , 188 Ariz. 237, 244, 934 P.2d 801, 808 (App. 1997). We review an interpretation of a settlement agreement and an order dismissing a complaint de novo. Jeter v. Mayo Clinic Ariz., 211 Ariz. 386, 391, ¶ 18, 121 P.3d 1256, 1261 (App. 2005) (order dismissing complaint); Citibank (Arizona) v. Bhandhusavee, 188 Ariz. 434, 435, 937 P.2d 356, 357 (App. 1996) (settlement agreement).
I. Refusal to Impose Sanctions Against the Peels
¶18 Richard submitted three separate motions for sanctions which were all denied. He appeals the denials and argues that that the Peels should be sanctioned for: (1) answering the complaint before service of the lawsuit, rather than supplying the accounting requested; (2) for not timely providing the accounting; and (3) for stating in their disclosure statement and discovery responses that they had no additional documentation related to the accounting, when they did. In Richard's view, the foregoing unreasonably expanded or delayed the proceedings and violated Rule 11. The trial court did not err in denying all three motions. ¶19 First, the Peels did not unreasonably expand these proceedings by answering the complaint prior to being served. The complaint did not merely seek an accounting, it also alleged that the Peels had converted trust assets, so there was no reason for the Peels to presume that if they provided an accounting, Richard would dismiss the lawsuit. Perhaps more importantly, the successor trustee provided an accounting, and Richard and Mary Lou remained convinced that the accounting was deficient and that Bob had converted assets of the estate, despite the successor trustee's assurance under oath that he had provided a complete accounting and that he was satisfied that no other significant assets existed that were not included in the accounting. Thus, the Peels' decision to answer the complaint did not expand the proceedings. ¶20 As for the alleged delay in preparing the accounting, the record is clear that at the time that the lawsuit was filed, no accounting was due. The irrevocable trust, the only trust mentioned in Richard's complaint, required the trustee to render an annual accounting. The revocable trust requires a semiannual accounting. Mother died in June of 2009 and the lawsuit demanding an accounting was filed only four months later in October. The record indicates that any delay in providing the accounting was unavoidable and did not unreasonably expand or delay these proceedings. ¶21 Richard next argues that sanctions are appropriate because the Peels failed to disclose the trust documentation in their possession in their disclosure statement or in their response to request for production of documents. Richard's argument starts with the erroneous premise that "[t]he uncontroverted testimony of Appellee, Robert Peel, proved he had received a complete accounting of the financial accounts and estate planning documents which were at the heart of this case from the . . . trust financial advisor, Allen Freedman, in July or August of 2009." In fact, Bob testified that in July of 2009, he had no written trust documentation to provide to Richard. Freedman testified that both brothers and both wives attended a meeting he conducted in July of 2009, in which he disclosed the identity and value of all trust assets. After that meeting, Freedman provided copies of documentation related to the trust to Bob, but Freedman did not testify that he had provided a complete accounting at that time, as Richard claims. ¶22 Additionally, the complaint only references the irrevocable trust. Bob was not the trustee of the irrevocable trust and Richard did not call Ann as a witness at trial. In response to the request for production, the Peels objected to having to provide any documentation related to any other trust as it was irrelevant. It does not appear from the record that Richard took any action to compel disclosure or broaden the scope of the lawsuit to include all of the trusts. ¶23 Notwithstanding the foregoing, there is evidence Bob may not have included in his initial disclosure statement all the documentation he had. Even assuming Bob did not include such documentation in the initial disclosure statement, it does not change the result under either Rule 11 or A.R.S. § 12-349. ¶24 Rule 11 provides that if a party signs a pleading in violation of Rule 11, the court must impose "an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, including a reasonable attorney[s'] fee." The sanction imposed must bear some relationship to the violation, and where a monetary sanction is imposed, it should be related to the expenses directly caused by the sanctioned conduct. See Taliaferro v. Taliaferro, 188 Ariz. 333, 341, 935 P.2d 911, 919 (App. 1996). It does not appear from the record that Richard incurred any expense as a result of Bob's alleged failure to provide the documentation he had on January 31, 2010, nor does Richard make any such claim. Moreover, all relevant documentation was provided to Richard when the successor trustee took over in mid-2010. ¶25 Nor did the delay in disclosure unreasonably expand or delay the proceedings under A.R.S. § 12-349. Richard has not identified any unnecessary discovery conducted or motions filed as a result of any delay in disclosure. In fact, Richard continued to prosecute this lawsuit after he received the relevant documents. Had he been satisfied and dismissed the lawsuit, it may have been appropriate to impose a sanction equal to the fees incurred from the date disclosure was required to the date of actual production as an appropriate sanction, but that is not what happened here. Richard continued to prosecute the lawsuit even after the successor trustee provided Richard with a complete accounting. ¶26 In sum, on these particular facts, we find that it was within the trial court's discretion to decline to impose sanctions against the Peels for the approximate six-month delay in providing relevant documents to Richard.
Moreover, trial testimony and exhibits demonstrated that these were complex interrelated trusts, and that Bob was a lay trustee with no prior experience administering a trust. There was evidence that Bob was overwhelmed by the complexities of the trusts, the particulars of which Mother had not shared with him, and Mother's affairs when she died were in disarray. Finally, it appears that various assets of the charitable remainder trust were being sold to fund at least one of the other trusts. This transaction was not complete until sometime after the successor trustee took over administration of the trust in mid-2010. Holdsworth testified that, for this reason, there was no way that Bob could have valued the trust assets during his tenure as trustee. Holdsworth was not able to do so until after he had negotiated the sale of the irrevocable trust's partnership interests.
Bob admitted that sometime after the meeting in July, he had received documentation regarding the trusts from Freedman and that he had not forwarded copies to Richard. He provided various excuses for his lapse: he did not want to deal with Richard or Mary Lou because they were belligerent, that Richard himself had never asked Bob for the documentation, and that he did not believe that he had all of the documentation related to the trust and did not want to produce it piecemeal. Bob testified that he provided all the documentation to the successor trustee, which the successor trustee used to complete the accounting. Holdsworth testified that he became successor trustee in mid-2010.
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II. Award of Sanctions against Richard
¶27 Richard argues that the trial court should not have imposed sanctions against him because he took reasonable and consistent positions throughout the proceedings and there were no serious or intentional discovery violations on his part. We disagree. ¶28 The parties appeared at trial approximately nineteen months after the complaint was filed for conversion of trust assets and an accounting. At trial, Richard sought to pursue his conversion claim based on the alleged conversion of Mother's personal possessions from her Texas home, and a real estate commission paid to Ann for the sale of Mother's Texas home. All of these items were the subject of a probate action in Texas, which Richard had notice of, but did not contest. The trial court questioned whether it had jurisdiction to hear such claims and Richard's counsel indicated that he was not prepared to provide any authority to the court that established that it did have jurisdiction. For that reason, the court ruled that it did not have jurisdiction to hear this claim. Richard also sought to pursue a conversion claim of Mother's vehicle, but the court dismissed any claim associated with the vehicle due to untimely disclosure. ¶29 Additionally, there were a number of disclosure violations by Richard. Richard had not disclosed the substance of his claims. The claim of conversion of the vehicle had first been raised by Richard only two weeks before trial in connection with his motion for sanctions, while he did not provide a list of personal possessions and their value prior to trial. Richard also complained for the first time at trial that Bob had not given him all of Mother's coins as agreed at the settlement conference. He made no mention of this fact when he moved for sanctions alleging the Peels violated the terms of the settlement agreement. Richard also presented a witness to testify whom he had disclosed by name only, three days before trial. As a result, the Peels objected to her testifying because they had no idea how she was related to the case or what she intended to testify about. The trial court precluded her from testifying on the grounds of untimely disclosure. ¶30 Given the lack of disclosure and Richard's attorney's inability to provide any authority from which the court could conclude that it had jurisdiction over the Texas probate, the trial court dismissed the conversion claim. ¶31 Richard then sought to pursue his claim against Bob related to his concerns regarding the accounting. However, Bob had resigned as trustee in mid-2010 and the successor trustee prepared the accounting. Although Bob would remain liable for any breach of duty while he was trustee, Richard had no cause of action against Bob for any deficiency with the accounting. Thus, the trial court dismissed this claim as well. ¶32 The trial court was most troubled by Richard's attorney's failure to be prepared for trial and failure to disclose, finding that counsel had either not completed discovery or intended to complete it at trial. The trial court found that this resulted in the "unnecessary expansion, delay and expense of the [underlying] proceeding." Given that both of Richard's claims were dismissed at trial and that he withdrew his motion for sanctions, the trial court did not abuse its discretion in finding that sanctions were warranted under Rule 37(a) or err in holding that sanctions were warranted under A.R.S. § 12-349(A)(3).
III. Interpretation of the Settlement Agreement and Dismissal of the Accounting Claim
¶33 With no citation to the record, Richard argues that the trial court interpreted the settlement agreement in such a fashion that it had no legal effect. We presume that the settlement agreement referenced is the trial court's order memorializing the parties' agreement at the settlement conference. Richard appears to argue that implied in the order is an obligation that the Peels must provide all information in their possession to the trustee, to enable to the trustee to prepare the accounting, and that the trial court did not enforce this implied obligation. ¶34 We do not reach this issue because the record reflects that Bob provided all of the documentation in his possession to the successor trustee. With respect to the alleged missing items: the CPA tax bill, bills for repairs to the Texas home and the commission on its sale, the successor trustee testified that he "grilled" Bob as to such items and was satisfied with the explanation he provided. Notwithstanding, the trial court ruled that these items fell outside the scope of the accounting which "specifically deal[t] with bank accounts, annuities, insurance policies, and any other significant assets of The Estate of Martha May (sic) Peel." ¶35 It is clear from the above order, which, of note, was prepared by Richard's counsel for the court's signature, the successor trustee had a duty to prepare a complete accounting. Therefore, any breach of that duty would give rise to a cause of action against the successor trustee, not Bob. The trial court did not err in dismissing the accounting claim.
IV. Holding Regarding Resignation as Trustee
¶36 Richard's final argument on appeal consists of only one two-sentence paragraph that the trial court held that a trustee can avoid his legal responsibilities to his trustor by resigning as trustee. Richard provides no citation to the record to inform us as to when or where the trial court made this ruling. Nor does Richard provide any facts as to the legal responsibilities that Bob supposedly avoided by resigning. See Nationwide Res. Corp. v. Massabni, 134 Ariz. 557, 565, 658 P.2d 210, 218 (App. 1982) (stating it is not incumbent on an appellate court to develop an argument for a party). We decline to address this issue.
V. Attorneys' Fees on Appeal
¶37 Both parties request an award of attorneys' fees on appeal. None of the four issues raised on appeal had any merit, as there was no legitimate factual dispute or legal support for any of the issues raised. Not only were Richard's briefs poorly written, but in most instances the paucity of legal authority cited was irrelevant to the issues framed. With respect to the third issue, this Court had to scour the record to discern the basis for counsel's unwarranted criticism of the trial court. The Peels, of course, prevailed on every issue. ¶38 We are left with two questions. First, division and distribution of parents' estates can often lead to unnecessary disputes between family members. Second, we are faced with who should be responsible for any fees or costs, Richard or his attorney. The trial court specifically reminded Richard's counsel of his "duty to advise and counsel his client on the merits of proceeding to trial on the claims asserted and the possibility of the imposition of attorneys' fees as a sanction should the Court determine the case lacked merit." Counsel had the same responsibilities when advising Richard whether, and what issues, to appeal. Even assuming that Richard insisted on filing an appeal after being counseled that there were no meritorious appealable issues here, counsel had a duty, under these facts, to decline appellate representation of his client. ¶39 Acting in our discretion, we award reasonable attorneys' fees pursuant to A.R.S. § 12-349 in favor of the Peels. However, in an effort to allow the parties to attempt to rebuild bridges between them, we waive the time requirements of ARCAP 21 for filing a statement of costs and affidavit of attorneys' fees in the hope that the parties might be able to resolve that issue between them. The Peels shall have thirty days from the filing of this decision to comply with ARCAP 21 and request the amount of fees and costs they seek from Richard and/or his attorney. Upon review of any such request and response and reply thereon, we will determine whether Richard and/or his counsel should bear such cost. If no such request is received by the above deadline, no fees or costs will be awarded.
CONCLUSION
¶40 We affirm the trial court's award of sanctions against Richard, its refusal to impose sanctions against the Peels, and its dismissal of the complaint. We also award costs and attorneys' fees on appeal to the Peels.
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DONN KESSLER, Judge
CONCURRING:
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JOHN C. GEMMILL, Presiding Judge
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JON W. THOMPSON, Judge