Haworth v. Ligon
1 CA-CV 16-0458
| Ariz. Ct. App. | Oct 19, 2017Background
- Robert and Ruth Lloyd created a revocable trust splitting assets between their niece Judy (trustee) and grandchildren Amber and Autum; distributions were to be made at age 25 and the beneficiary’s interest would terminate "thereupon."
- Judy, as trustee, paid Amber $25,000 on Amber’s 25th birthday; when Autum turned 25 she was told she had no inheritance and that Amber’s payment was a personal gift. Judy and her husband Grover resisted producing trust documents and accounting requests.
- Petitioners Amber and Autum sued (petitioned) to remove Judy as trustee, alleging breach of trust and seeking damages; the superior court removed Judy, found breach, and reserved damages.
- After further proceedings and an evidentiary hearing, the superior court entered judgment against Judy for $290,145.14 (including $82,540.62 in attorneys’ fees) and imposed a constructive trust on Judy’s personal assets, the Ligons’ community assets, and their home.
- On appeal Judy challenged timeliness of the claims, the imposition of a constructive trust (including against community property and the home), and the attorney-fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations for breach of trust | Claims timely because distributions were never made; interest terminated only upon distribution | Claims time-barred because beneficiaries’ interests terminated on their 25th birthdays | Held for plaintiffs: interests did not terminate until distributions; claims not time-barred |
| Entitlement to a constructive trust over Judy’s and community assets | Constructive trust proper because Judy converted trust assets and used them to acquire assets (including home) | Constructive trust improper absent tracing to specific trust property and because adequate legal remedies exist | Vacated constructive trust: plaintiffs failed to trace specific assets except proceeds used toward the home; equitable lien may be considered on remand; constructive trust over community property improper without suing spouse |
| Constructive trust over the Ligons’ home/community property | Home equity derived from converted trust funds, so constructive trust of community interest warranted | Home likely purchased with mixed funds; cannot impose constructive trust without tracing and spouse not sued | Vacated; court may consider equitable lien on Judy’s (or community) interest and permit plaintiffs to amend to add Grover on remand |
| Attorneys’ fees award procedure and amount | Fees awarded under A.R.S. § 14-11004(B) were reasonable and should stand | Fee award procedurally defective: court accepted counsel’s oral avowal without an application or opportunity to contest | Vacated fee award: no adequate record support or process; remand for proper application and adversarial testing |
Key Cases Cited
- KAZ Const., Inc. v. Newport Equity Partners, 229 Ariz. 303 (App. 2012) (trusts must be interpreted according to their terms)
- Cal X-Tra v. W.V.S.V. Holdings, L.L.C., 229 Ariz. 377 (App. 2012) (constructive trust available for unconscionable conduct including fiduciary breach)
- ML Servicing Co., Inc. v. Coles, 235 Ariz. 562 (App. 2014) (constructive trust not available when adequate legal remedy exists)
- Murphy Farrell Dev., LLLP v. Sourant, 229 Ariz. 124 (App. 2012) (burden to prove constructive trust by clear and convincing evidence)
- Burch & Cracchiolo, P.A. v. Pugliani, 144 Ariz. 281 (1985) (prerequisite to constructive trust is identification/traceability of specific property)
- Byers v. Wik, 169 Ariz. 215 (App. 1991) (equitable liens as alternative remedy when unjust enrichment would result)
- Spudnuts, Inc. v. Lane, 139 Ariz. 35 (App. 1984) (marital community must be sued jointly to hold community property liable)
- Reed v. Reed, 154 Ariz. 101 (App. 1987) (procedural/due process protections when awarding attorney fees)
- In re Conservatorship for Mallet, 233 Ariz. 29 (App. 2013) (standard of review for fee awards)
- State ex rel. Corbin v. Tocco, 173 Ariz. 587 (App. 1992) (fee award must have reasonable basis in the record)
- US Bank, N.A. v. JPMorgan Chase Bank, N.A., 242 Ariz. 502 (App. 2017) (appellate costs rule and partial success considerations)