Court: Court of Appeals of Arizona; June 15, 1999; Arizona; State Appellate Court
Diane I. Moore filed a petition against her former husband, Frank H. Moore, and Georg Kieber, the trustee of a living trust they established, seeking relief for alleged improper actions by Kieber. Kieber successfully dismissed the lawsuit and Moore appealed, which was affirmed in a separate decision. Kieber cross-appealed the trial court's denial of his request for attorney’s fees under Arizona Revised Statutes (A.R.S.) section 12-341.01(A), which allows for fee awards in contested actions arising from contracts. The court concluded that a trust does not constitute a contract, thus A.R.S. section 12-341.01(A) does not apply to Kieber's situation as the successful party. Kieber argued that the dispute stemmed from two express contracts: the trust instrument and a property settlement agreement from the dissolution. He claimed the issues related primarily to the trust's interpretation rather than his fiduciary duties, asserting that the claim against him was contract-based. The court emphasized its authority to interpret statutes and noted previous cases where attorney's fees were granted but did not clarify whether trust disputes arise from contracts. The court ultimately determined that Kieber was not entitled to attorney's fees under the cited statute, affirming that trust disputes do not fall within the statutory provisions governing attorney's fee awards.
In Tovrea v. Nolan, beneficiaries of a residuary trust appealed a summary judgment favoring the co-personal representatives of their father's estate, alleging breach of fiduciary duty. They sought attorney's fees on appeal under section 12-341.01, arguing a contractual basis between the trustor and trustees. The request was denied since the appellants were not prevailing parties and their claims were rooted in tort, not contract. The document notes the absence of published opinions addressing whether a trust qualifies as a contract for attorney's fees purposes, indicating reliance on the Restatement for legal guidance.
The original agreement was acknowledged as a living trust under Liechtenstein law, with all parties agreeing to the trust relationship. The Restatement (Second) of Trusts delineates a trust from a contract, emphasizing that a trust involves distinct rights, obligations, and remedies. It clarifies that a contract for a third party's benefit does not create a trust; rather, a trust is established when property is transferred with the intent to benefit a third party directly. The nature of the relationships and interests diverges significantly between contracts and trusts, influencing enforcement rights, statute of limitations, and intent manifestations.
Beneficiaries of a trust obtain beneficial interests in trust property, while contract beneficiaries possess personal claims against the promissor. A fiduciary relationship exists between trustee and beneficiary, unlike in contracts, where no such obligation arises. Trustee duties stem from the trust relationship and are equitably enforced, independent of any contractual agreement, with failure to perform duties not constituting breach of contract. The creation of a trust is viewed as a conveyance of beneficial interest rather than a contractual arrangement, and a trustee's acceptance of the trust does not create enforceable contractual obligations.
A subdivision trust is classified as a common law trust governed by the trust instrument and general trust law, where violations of fiduciary duties can lead to liability for breach of trust. Trustee duties arise from the trust's terms, common law, and applicable statutes, with fiduciary duties stemming from state law rather than underlying contracts. Trust beneficiaries have the right to sue trustees for breaches of trust. The Restatement (Second) of Contracts indicates that agreements transferring property may create an agency or trust relationship based on the parties' intentions, with beneficiaries' rights enforced according to trust law. Although trust beneficiaries may recover damages under specific circumstances, the relationship between the settlor and trustee is not characterized as contractual, as trustee duties arise from the unique trustee-beneficiary relationship. The analysis is supported by Arizona case law, specifically Barmat v. John and Jane Doe Partners A-D, which clarifies that attorney-client relationships impose special duties that exist independently of contracts, and that breaches of these duties are tortious rather than contractual. Thus, claims arising from trust relationships do not qualify as contractual under A.R.S. section 12-341.01(A), leading to the affirmation of the trial court's denial of attorney's fees to Kieber. Additionally, Diane's claim related to a property settlement agreement has been dismissed without prejudice for separate pursuit in a domestic relations action.
