Opinion
1 CA-CV 10-0572
09-22-2011
In the Matter of the: ELIZABETH J. SCOZZARI TRUST JUDITH D. BREWER; ARLENE H. SCOZZARI; RAYMOND G. SCOZZARI; EUGENE T. SCOZZARI, Petitioners/Appellees, v. GERALD SCOZZARI, as former Trustee of the Elizabeth J. Scozzari Trust, Respondent/Appellant.
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. Civ. P. 31.24
MEMORANDUM DECISION
(Not for Publication -
Rule 28, Arizona Rules
Of Civil Appellate Procedure)
Appeal from the Superior Court in Maricopa County
Cause No. PB2008-001698
The Honorable David O. Cunanan, Commissioner
The Honorable Lindsay B. Ellis, Commissioner (Retired)
REVERSED AND REMANDED
Baroumes & Bruen, PLC
By Derek M. Baroumes
Charles J. Bruen, III
Attorneys for Plaintiff/Appellant
Sun City
Judith D. Brewer,
In Propria Persona, Petitioner/Appellee
Ocala, FL
KESSLER, Judge ¶1 Appellant, Gerald Scozzari ("Gerald"), appeals from an order removing him as Trustee of the Elizabeth J. Scozzari Trust (the "Trust") for a breach of fiduciary duties for allegedly using Trust funds held in two bank accounts for his own purposes and requiring him to return $36,786.38 to the Trust. Gerald argues in part that the court erred by holding that certain bank account funds should transfer to Scozzari's estate under Arizona Revised Statutes ("A.R.S.") section 14-6212 (2005), and by removing him as trustee. The Appellees did not file an answering brief. For the reasons stated below, we agree that the superior court erred in holding that the funds belonged to the estate (and thus the Trust pursuant to a pour-over provision in the will) and reverse and remand for further proceedings consistent with this decision.
Appellees, who sought to remove Gerald as trustee, are his siblings, Arlene Scozzari, Raymond Scozzari, Eugene Scozzari, and Judith Brewer (successor trustee).
FACTUAL AND PROCEDURAL HISTORY
¶2 In 1998, Elizabeth Scozzari ("Scozzari") executed a will. The will referenced Scozzari's Trust and specifically allocated all her personal property to her trustee, her son Gerald. Gerald was also the executor of Scozzari's estate. The will also contained a residuary disposition clause that left
the residue and remainder of my estate, including all real property, that may not have been transferred to said Trust during my lifetime (unless I held such property as a joint-tenant-with-right-of-survivorship with another who survived me), and including all the property I can dispose of by my Will and not effectively disposed of by the preceding Articles of this Will, to the Trustee . . . in order to be added to and disposed of as part of the assets of such Trust.¶3 The parties did not contest the validity or terms of the will or the Trust and no one began a probate proceeding. According to all parties, the Trust demonstrates that Scozzari intended that all her children share equally in her estate. Aside from funds in her bank accounts, Scozzari's home was the most valuable asset in her Trust. ¶4 In May 2001, Scozzari opened a new checking account at a local bank. The application reflects a single-party account in which Gerald was listed under the section for a "relative not living with" Scozzari. The account was linked to a savings account that belonged to Scozzari at the same bank. A few months later, Scozzari and Gerald signed a superseding application adding Gerald as a co-applicant to the checking account. Gerald was not referred to in his capacity as trustee or executor on the application. The application did not designate the type of account or reflect the terms of the account. The bank statements were addressed to Elizabeth or Gerald, and the checks were printed with both names. ¶5 Days before her death, in October 2005, Scozzari executed an amendment ("Amendment") to her Trust giving the house to Gerald but permitting another son, Ronald, to live in it until Ronald's death or until Ronald wanted to move. ¶6 The parties stipulated that in October 2005, when Scozzari died, the two bank accounts had an approximate balance of $75,000. In the month following Scozzari's passing, Gerald transferred $48,150 from the savings to the checking account and issued checks to each sibling in the amount of $5000 each. The notations on the checks stated "inheritance" and "MOM." He then issued checks from his personal account to five of the Scozzari siblings in the amount of $775 from Scozzari's life insurance proceeds. The check notations stated "life ins. moms." By mid-October, the balance of available funds in the accounts was $39,627.42. During the same time period, six of the seven Scozzari siblings signed an "Agreement" which stated that Ronald would have a life estate in the house and it would then be sold and the proceeds divided equally among the six siblings. ¶7 In July 2008, four of the seven Scozzari siblings ("Petitioners") filed this action petitioning for an accounting and removal of Gerald as the trustee. Gerald provided an inventory and accounting. The inventory reflected the main assets were Scozzari's home and her bank accounts. The estimated total liability of the estate was $46,773.23, which included the distributions made to the siblings and Gerald, and funeral, medical, and home expenses. As part of the inventory, Gerald claimed that the joint accounts belonged to him and not the estate. Petitioners objected, claiming in part that the funds in the bank accounts belonged to the estate. Based upon the objection, the court scheduled a hearing for January 29, 2009. Prior to the hearing, the court apparently held several status conferences with the parties which limited the issues for the hearing.
Though on Scozzari's application, the pay on death (POD) box was selected, there was no named beneficiary. This portion of the application was under the section to be completed by the bank.
The possible options for account types in the "Account Relationship" section of the application included: joint tenancy with right of survivorship; payable on death/in trust; community property; individual; estate account; other. This portion of the application was under the section to be completed by the bank.
Gerald issued the check to himself in the name of his wife.
Neither Gerald nor one of his sisters received a check. Gerald claims that he was the sole beneficiary of the life insurance proceeds, but in an effort to keep family harmony he divided the money among his siblings.
I. The January 2009 Hearing ¶8 At the hearing, the court clarified that the primary issue was going to be whether the funds in the bank accounts belonged to Gerald or the estate. While the attorneys for the parties argued that issue, no witnesses testified. The only exhibits the court admitted were a bank statement for the two accounts reflecting activity from September 20, 2005 to October 19, 2005, and the original and superseding account applications.
A. The Bank Accounts ¶9 At the hearing, the parties did not dispute that 1) there was no survivorship designation on the account, 2) all funds were contributed by Scozzari, and 3) her will provided that her other assets would pour over into the Trust. The parties agreed that subject to the exception for her disabled son Ronald, Scozzari's Trust and will treated her children equally. ¶10 Petitioners maintained that the account funds should transfer to the estate through the pour-over provision in the will. Gerald argued the funds in the bank accounts were his and that he had disbursed money to beneficiaries and then used a large portion of the funds for maintenance of the home. Gerald argued that the inheritance checks he issued were really "advanced distributions" from the account funds that belonged to him personally, and that the Trust was responsible to reimburse him. Specifically he stated that,
[t]he only asset that was left was the non-liquid real property. . . . [Ronald] was going to live in that property until he passed away. . . . So the Trustee essentially just said . . . [I'll] write everybody a check out of this account and then . . . . at some point down the road hopefully the house was going to¶11 Both parties argued A.R.S. § 14-6212 controlled the disposition of the bank accounts. Gerald claimed that unless the account was explicitly designated a "Tenancy in Common," the default position presumes the account to be with survivorship and A.R.S. § 14-6212(A) controls. Petitioners argued the opposite — that without an explicit designation of survivorship, survivorship cannot be presumed and A.R.S. § 14-6212(C) controlled the disposition of the accounts. As discussed in more detail below, the court later issued an order declaring that the funds belonged to the estate and not Gerald.
become more valuable . . . . that money could be . . . collected at some point.
B. The House ¶12 Gerald initially argued that pursuant to the Agreement of six of the siblings, the home was Trust property. However, once the court stated the Agreement was unenforceable because one of the siblings had not signed it, Gerald argued that he was entitled to the home personally based on the terms of the Amendment because the Amendment made him the contingent beneficiary of Scozzari's home if he outlived Ronald. He contended the Amendment gave him the home personally and gave Ronald a life estate. Petitioners maintained that the home was Trust property, and that the Amendment did not modify the Trust except to give Ronald a life estate. At the hearing, the court held in abeyance any issues regarding the Amendment.
II. The April 2009 Order ¶13 In April 2009, the court ordered Gerald removed as trustee for a breach of fiduciary duties. First, the court held that because the bank account applications did not expressly state that the accounts were to be held by Scozzari and Gerald as joint tenants with right of survivorship, the funds in the accounts belonged to the estate and should have poured over to the Trust. It then removed Gerald as trustee for failure to inform his siblings about the administration of the Trust, treating the estate property as his own, and seeking to personally benefit from the estate's funds. The court also held that the "Agreement" assuming the obligation of supporting Ronald was not enforceable because not all siblings had signed the document. The court ordered that Petitioners file a proposed order and that Gerald return all Trust assets to the Trust and provide a full and complete accounting. ¶14 After considering the proposed order and Gerald's objections, the court issued a minute entry approving Petitioners' proposed order and appointing a successor trustee. The court explained that as to Gerald's objections on the scope of the issues presented at the January 29 hearing, the parties already had numerous status conferences and had refined the issues to be presented. It also clarified that although neither party introduced the will or Trust at the hearing, the parties did not dispute the key provisions of those documents. The court also clarified that it was removing Gerald as trustee because of his use of the two bank accounts for his own purposes. ¶15 On July 23, 2009, the court entered the order related to the funds and removal of Gerald. The order tracked the court's April minute entry removing Gerald. The order stated that neither bank account had a right of survivorship. And upon Scozzari's death, the funds therefore belonged to the estate. The court further found that Scozzari added "Trustee's name" to the bank accounts "to facilitate the distribution of such accounts to the trust following her death." The court appointed another Scozzari sibling/beneficiary, Judith Brewer, as successor trustee and ordered Gerald to transfer all Trust assets to the Trust by May 27, 2009, and file a supplemental accounting. ¶16 In September 2009, Gerald filed a supplemental accounting. He stated that there were no funds remaining after deductions for funeral expenses, distributions to his siblings, other miscellaneous expenses, and the expense of maintaining the Trust home and trustee compensation. Petitioners objected to the supplemental accounting. Specifically they objected to the payment of one sibling's school loan ($3150), a check to a non-beneficiary-relative ($1000), compensation to the trustee for labor and repair work on the home ($4650), expenses predating Scozzari's death ($454), certain expenses claimed to be for the Trust home ($703), burial plots for one beneficiary sibling and Gerald's son ($4875), and Gerald's attorneys' fees in the Trust dispute ($18,509). Petitioners maintained Gerald's accounting listed at least $33,339 of non-Trust expenses. ¶17 Gerald filed a motion for an order transferring title of the Trust home to him, and Petitioners filed a petition for a determination of ownership of the Trust property. The court set a hearing for March 2010 to address Petitioners' various issues, including whether the home was Trust property and whether Gerald had to reimburse the Trust for funds he had used and for expenses paid by Judith as successor trustee. After the March 26 hearing, the court ruled that Scozzari's home should pass to Gerald personally, with Ronald to remain living in the home. The court ordered a report of accounting regarding the money to be transferred to the estate and ordered Gerald to reimburse the Trust. ¶18 On July 9, 2010, the court entered a minute entry ordering Gerald to return $35,683.80 and separately $1102.58,for a total of $36,786.38, to the Trust. ¶19 Gerald timely appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(B) (2003). No one has appealed the finding that Gerald inherited the home.
The court's order concluded in part that,
On May 21, 2001, Elizabeth Scozzari opened an account. . . . [O]n or about August 30, 2001, Gerald Scozzari's name was added to the account. No joint owner or POD beneficiary was made on either date. All deposits were made with Elizabeth Scozzari's funds. After his mother's death, Gerald Scozzari exercised sole ownership of the . . . account and did not transfer those funds to the Trust or equally distribute the balance among his siblings.
The ownership of account funds generally belongs to the parties in proportion to the net contributions of each party to the sums on deposit unless there is clear and convincing evidence to the contrary. A.R.S. § 14-6211(A). No evidence has been presented to establish the intention of Elizabeth Scozzari to leave the funds in her account to the Trustee personally. To the contrary, a review of the Decedent's Will and Trust reflects that, with the exception of providing shelter to her disabled son, Ronald Scozzari, the intent was for all of her children to share equally in her assets. Many parents add a child's name to their accounts for convenience purposes. Not only would such account access assist if the parent were infirm but in cases such as this, where assets are intended to pass outside of probate, the addition of a Trustee's name to an account, would facilitate the distribution of assets.
Gerald's only claimed compensation was for "Trustee labor for repairs and maintenance to [the] Trust home." A lot of the funds accounted for were used for home expenses, including insurance, taxes, and approximately $4000 in repairs and remodels.
Gerald provided copies of the checks reflecting that some of the supplies for the home he included in the accounting, were paid from his personal checking account.
Petitioners also argued that if the court determined the home belonged to Gerald personally, then none of the expenses associated with the home should have been included in the accounting.
Because Ronald signed a statement he was moving out of the Trust home, Gerald argued the condition precedent in the Amendment had been met, and the title of the home should pass to him personally.
This includes the following expenses Petitioners claimed Gerald had to return to the Trust: attorneys' fees ($18,508.80); burial plots ($4875); trustee labor ($4650); check to non-beneficiary relative ($1000); and resident contributions/expenses omitted from trustee accounting ($3500). Petitioners did not claim reimbursement for approximately $8000 Gerald spent on home insurance, taxes, and maintenance.
This latter amount was for taxes the successor trustee, Judith, paid from her personal funds for the home in the belief that it was Trust property.
III. A.R.S. § 14-6212(A) presumes survivorship in multiple party accounts absent an express contrary intent. ¶20 Gerald appeals the superior court's July 9, 2010 order, which he argues flows from the court's erroneous July 23, 2009 order. The thrust of Gerald's argument is that under A.R.S. § 14-6212, a multiple party bank account that does not specifically designate that it is a "tenancy in common" or without a right of survivorship, is presumed to be a joint account with the right of survivorship. We agree with Gerald. ¶21 Under A.R.S. § 14-6201 (2005), a "'[m]ultiple party account' means an account payable on request to one or more of two or more parties, whether or not a right of survivorship is mentioned." During life, such "an account belongs to the parties in proportion to the net contribution of each to the sums on deposit." A.R.S. § 14-6211 (2005). After death, "sums on deposit in a multiple party account belong to the surviving party or parties." A.R.S. § 14-6212(A). The exception to § 14-6212(A) is if an account, "by the terms," is without right of survivorship, and then the deceased's net contribution passes to the estate. A.R.S. § 14-6212(C). ¶22 Subsection (A) does not require that a multiple party account contain specific survivorship language for the surviving party to receive funds, and thus, supports an automatic finding of survivorship. A.R.S. § 14-6212(A); see also 4 Ariz. Prac. Community Property Law § 4.7 (3d ed.) (West 2010) (citing A.R.S. §§ 14-6212 and -6213). In contrast, subsection (C), specifies that if the terms of the account explicitly exclude joint tenancy with survivorship, the exception in (C) applies and the funds belong to the decedent's estate. A.R.S. § 14-6212(C). In other words, subsection (C) describes specific limitations or exceptions to the premise of the statute expressed in subsection (A). ¶23 Interpreting § 14-6212 in conjunction with the definition of multiple party account in § 14-6201, we presume that the legislature was aware that using the general term multiple party account in § 14-6212(A) would give rise to automatic rights of survivorship whether or not such rights were expressly provided in the account language. See McCandless v. United S. Assur. Co. , 191 Ariz. 167, 174, 953 P.2d 911, 918 (App. 1997) (stating that courts "regularly presume the legislature knows its own laws"); see also State v. Hoggatt, 199 Ariz. 440, 444, ¶ 13, 18 P.3d 1239, 1243 (App. 2001) (noting that the court must avoid a construction that "would render certain portions of the statute superfluous and meaningless") . ¶24 The language of A.R.S. § 14-6213 (2005) also supports survivorship rights by stating: "[a] right of survivorship arising from the express terms of the account, § 14-6212 or a pay on death designation may not be altered by will." A.R.S. § 14-6213(B) (emphasis added); see also A.R.S. § 14-6216(B) ("[a] right of survivorship between parties married to each other arising from the express terms of the account or § 14-6212 may not be altered by will") (emphasis added); State v. Flynt, 199 Ariz. 92, 94, ¶ 5, 13 P.3d 1209, 1211 (App. 2000) (stating the court "construe[s] statutory provisions in light of their place in the statutory scheme so they may be harmonious and consistent") (citations omitted); State v. Pinto, 179 Ariz. 593, 596, 880 P.2d 1139, 1142 (App. 1994) (stating that the court must harmonize different parts of statute to give effect to each). ¶25 Moreover, the same automatic survivorship rights exist under the non-probate transfers section of the Uniform Probate Code; codified in Arizona at A.R.S. § 14-6101 et seq. See Unif. Probate Code § 6-212 (amended 1991). Specifically, the 1997 comment in § 6-212, states that:
None of the Petitioners filed an answering brief. While we could consider such failure as a confession of error, we exercise our discretion to discuss the issues on appeal on their merits. Evertsen v. Indus. Comm'n, 117 Ariz. 378, 383, 573 P.2d 69, 74 (App. 1997), approved and adopted by the Supreme Court,
117 Ariz. 342, 572 P.2d 804 (1977).
Section 14-6212(A) provides:
Except as otherwise provided in this section, on the death of a party, sums on deposit in a multiple party account belong to the surviving party or parties. If two or more parties survive and one is the surviving spouse of the decedent, the amount to which the decedent, immediately before death, was beneficially entitled under § 14-6211 belongs to the surviving spouse. If two or more parties survive and none is the surviving spouse of the decedent, the amount to which the decedent, immediately before death, was beneficially entitled under § 14-6211 belongs to the surviving parties in equal shares and augments the proportion to which each survivor, immediately before the decedent's death, was beneficially entitled under § 14-6211. The right of survivorship continues between the surviving parties. (Emphasis added).
Section 14-6212(C) provides:
Sums on deposit in a single party account without a pay on death designation or in a multiple party account that, by the terms of the account, is without right of survivorship, are not affected by the death of a party. However, the amount to which the decedent, immediately before death, was beneficially entitled under § 14-6211 is transferred as part of the decedent's estate. A pay on death designation in a multiple party account without right of survivorship is ineffective. For purposes of this subsection, designation of an account as a tenancy in common establishes that the account is without right of survivorship. (Emphasis added).
[t]he effect of subsection (a) is to make an account payable to one or more of two or more parties a survivorship arrangement unless a nonsurvivorship arrangement is specified in the terms of the account.¶26 Section 6-212 of the Uniform Probate Code, is nearly identical to A.R.S. § 12-6212. We find the above commentary persuasive. UNUM Life Ins. Co. of Am. v. Craig, 200 Ariz. 327, 334, ¶ 25, 26 P.3d 510, 517 (2001) ("[w]hen a statute is based on a uniform act, we assume that the legislature 'intended to adopt the construction placed on the act by its drafters.'" (quoting State v. Sanchez, 174 Ariz. 44, 47, 846 P.2d 857, 860 (App. 1993))). ¶27 In sum, the right of survivorship in a joint account arises by operation of law under A.R.S. § 14-6212(A). Whereas, A.R.S. § 14-6212(C) applies when accounts are expressly without rights of survivorship, such as a tenancy in common. ¶28 Here, there was evidence that Gerald was a signer on the checking account because both his and Scozzari's names were on the checks. He was also listed as a recipient on bank statements. And the only instruments or bank documents provided to the court were account applications that listed Gerald as a co-applicant, but were silent regarding survivorship rights. Most importantly, there was no evidence that Scozzari's accounts were specifically without survivorship. Thus, under the statute, survivorship was automatic, and Gerald was entitled to the account funds. ¶29 Even assuming that an automatic right of survivorship created in A.R.S. § 14-6212(A) is rebuttable, here Petitioners have not rebutted evidence of survivorship. The court simply applied an inapplicable presumption based on its interpretation of §§ 14-6211 and -6212 to conclude that Gerald failed to show he had survivorship rights. As the court summarized, under A.R.S. § 14-6211,
(Emphasis added).
[t]he ownership of account funds generally belongs to the parties in proportion to the net contributions of each party to the sums on deposit unless there is clear and convincing evidence to the contrary. A.R.S. § 14-6211(A). No evidence has been presented to establish the intention of Elizabeth Scozzari to leave the funds in her account to the Trustee personally.This analysis does not properly apply A.R.S. § 14-6212(A) and thus, improperly concluded that Gerald did not prove survivorship. Under A.R.S. § 14-6211, the presumption that codepositors share in proportion to their contributions is rebutted if it is shown by clear and convincing evidence that codepositors intended a different sharing arrangement during their lives. There is nothing to suggest, however, that a determination under § 14-6212 should be analyzed using the standard in § 14-6211. Section 14-6211 only applies during the depositors' lives while section 14-6212 applies upon death. A.R.S. § 14-6211 is a different statute and its presumption, rebuttable by clear and convincing evidence, is not applicable here. Our conclusion is supported by the 1997 comment to Section 6-211 of the Uniform Probate Code which states, "[i]t is important to note that [this] section is limited to ownership of an account while parties are alive. Section 6-212 prescribes what happens to beneficial ownership on the death of a party." ¶30 Thus, the court improperly applied §§ 14-6211 and - 6212 to determine Gerald did not own the funds in the accounts as a survivor and as a result he breached his fiduciary duties as trustee. We reverse the court's order as to ownership of the bank account funds and remand this matter with instructions to the court to reinstate Gerald as trustee, and for further proceedings to resolve outstanding reimbursement issues in light of this decision.
See also Unif. Probate Code § 6-203 cmt. (1997) (stating that an explicit "tenancy in common title would be treated as a multiple-party account without right of survivorship").
In Safely v. Bates, this Court stated the following with respect to A.R.S. § 14-6104, a predecessor statute to § 14-6212:
[The statute] specifically provides that sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created.26 Ariz. App. 318, 320, 548 P.2d 31, 33 (1976); see also 10 Am. Jur. 2d Banks § 667 (West 2011) ("In creating a joint bank account with right of survivorship, it is a matter of no importance that the particular terms 'joint ownership' and' joint account' are not used" the determinative factor is the intent of those opening the account.).
This is the only basis the court relied upon to remove Gerald.
Given our holding on the issue of the removal of the trustee for use of the bank funds and the ownership of those funds, we need not address Gerald's alternative arguments concerning due process and the application of A.R.S. § 14-3102 (2005).
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IV. Attorneys' Fees on Appeal ¶31 Gerald requests attorneys' fees be awarded to him on appeal based on A.R.S. § 12-349 (2003). That statute provides that this Court may assess reasonable fees under certain circumstances where an action was unjustifiable. Specifically, bringing or defending an action without substantial justification warrants an award of fees. A.R.S. § 12-349(A)(1) (2003). Subsection (F) of the statute defines "without substantial justification" to mean "that the claim or defense constitutes harassment, is groundless and is not made in good faith." A.R.S. § 12-349(F). Here, we cannot say that the action was without substantial justification and therefore we deny Gerald's request for an award of attorneys' fees on appeal.
CONCLUSION
¶32 For the foregoing reasons, trial court erred in holding that the bank account funds belonged to the estate (and thus the Trust pursuant to a pour-over provision in the Will). We reverse and remand for further proceedings consistent with this decision. Because Gerald is the prevailing party, we will award him his taxable costs on appeal upon timely compliance with Arizona Rule of Civil Appellate Procedure 21.
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DONN KESSLER, Judge
CONCURRING:
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MARGARET H. DOWNIE, Presiding Judge
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PETER B. SWANN, Judge