This is a divorce but the issue raised in this appeal concerns the validity of an arbitration clause, here one in an agreement between the spouses creating a company to hold their assets.

Josiah Austin married wealthy Valer Austin and took over her financial affairs. He formed a holding company that assumed control of her assets, gave him community property rights to some of them, gave him control over all of them, and undid the effect of irrevocable trusts she had set up for her children. The agreements creating the company contained clauses requiring arbitration of disputes. Valer signed them without paying attention, trusting her husband. When she filed for divorce disputes concerning the company came up; he moved to compel arbitration of them; the trial court denied it.. He appealed; the Court of Appeals affirms.

Harber’s Estate (1969) held that postnuptial agreements are valid but that if one spouse challenges an agreement then the burden is on the other to prove, by clear and convincing evidence, that it was not fraudulent, coerced, unfair, or inequitable. The trial court used this standard to deny Josiah’s motion, although the opinion does not give the details of the ruling. Josiah’s position was that standard contract law should apply, under which Valer is presumed to know what she signed. The rule of Harber’s Estate had only been applied to postnuptial property settlements; Josiah argued that it should be limited to them.

The court points out (based on the trial court’s findings of fact) that the holding company’s effects “were no less severe than a traditional postnuptial property division agreement.” Because the agreements were made during the marriage “and altered each spouse’s property rights in the event of death” they were postnuptial agreements subject to Harber’s Estate.

Josiah argued that this would require separate counsel for spouses that create trusts “or other complex estate documents.” (We wouldn’t have called these arrangements terribly complicated, nor even unusual, at least for such people – the GRIT and GRUT and GRAT crowd – but the court seems to think them so.) The court’s response is, basically: “Well, yeah, what’s your point?

Valens’ children were parties because of their rights in those trusts. The trial court ruled that they weren’t bound by the arbitration agreement because they hadn’t signed it. Josiah argued they were bound, under Schoneberger (2004), because they were third-party beneficiaries who received a direct benefit. But the holding company did not benefit them, directly or otherwise; instead it reduced their rights. Josiah also argued that that they were estopped to dispute the arbitration clause because their claims in part depended on the holding company agreements. But the thrust of their position was that the agreements were improper; claims under the agreements were alternative claims made in case the children were held to be bound by them. “Such a contingency, to which they object, is not sufficient to create estoppel.”

(As a mildly interesting though unrelated note, the backstory here – which the opinion has no occasion to mention – is a classic Arizona tale: the rich easterners who buy a cattle ranch (in this case the El Dorado ranch in the Chiricahuas) so that they can spend some time in quaint surroundings and also tell their friends back home, and themselves, that they are “ranchers.” In the old days the formula was to buy some Mexican cattle, hire a few cowboys to fatten them up a bit on the ranch, then ship them to a feed lot. On occasion that actually made some profit but profit wasn’t the point. Nowadays things are simpler since you can keep just a few cows and push the conservation angle instead.) 

(link to opinion)

This case holds that the probable-cause  exception applies to in terrorem clauses in trusts. The result itself is reasonable but the way the court gets there gives us an opportunity to complain.

The Shaheen Trust contained a clause invalidating the interests of those who challenged it. Certain beneficiaries did challenge it. They lost but the trial court refused to enforce the clause. The trustee appealed, arguing that it should have.

The trial court essentially concluded that 14-2517 (you can challenge a will if you have probable cause despite a will provision to the contrary) applied to trusts as well (by applying a case – Stewart (2012) – that was based on the statute). So there were three possible issues: does the statute apply, what’s the law if it doesn’t, and, if necessary, was there probable cause?

The court first says that Stewart held that the statute applies only to wills. Actually, though, Stewart dealt with a “Will and Trust,” which is presumably why the trial court thought the case could apply, and it isn’t entirely easy to tell in Stewart where or whether that court meant to limit the statute.

But the court then says that, although the statute doesn’t apply, the Restatement of Property – which “suggests treating no-contest provisions in wills and trusts the same” – does, and therefore no-contest provisions in wills and trusts will be treated the same. This is abrupt and conclusory. The court relies on a comment in the Restatement, not even the black letter; since when have the comments  — this one written by a law professor thirty years ago – become the presumptive law of Arizona? Does the comment reflect the common law or the majority of jurisdictions, or was it just the Reporter’s opinion? Does the court know? Does it care? And the comment (which the court doesn’t quote, though if you look carefully at the cite you can at least spot that its a comment) says simply that there’s no reason to treat wills and trusts differently. What about expressio unius est exclusio alterius? The statute doesn’t say “trusts”; had the legislature thought of a reason to treat them differently? We doubt it, and it doesn’t look like the parties raised the issue. But doesn’t a proper respect for statutory law demand that the issue at least be acknowledged?

Regarding probable cause, the court first concludes that “when a single petition alleges multiple challenges to a will or trust . . . probable cause must exist as to each challenge.” On this point the court then reverses, since the trial court found one of the several challenges here to be without merit. That court found that the challenging beneficiaries had thought it subjectively reasonable but the test is objective reasonableness, for which there was no evidence in the record.

So the court remands for an order invalidating these beneficiaries’ interests.

But wait, there’s more. On another issue entirely, there’s a footnote. The beneficiaries argued that the appeal should be dismissed because the trustee failed to follow ARCAP 13(a)(3) (the brief must indicate the basis of the appellate court’s jurisdiction.) The trustee didn’t cite any statute, she simply said, according to the court, that she was “appealing from a judgment of the superior court [sic].” Then the court says “we believe [that] is sufficient.” The court suggests the beneficiaries’ argument is “hyper-technical” and that it has an independent duty to examine its jurisdiction.

So remember that, at least in Tucson, you don’t have to follow the rule any more unless you happen to have an appeal from something other than a complete and final judgment. The court won’t do anything except to chastise your opponent for raising the issue. Some rules, its seems, are binding and others are hyper-technicalities that can be ignored.

(No, the court shouldn’t dismiss an appeal where jurisdiction exists just because the appellant failed to point out specifically why it exists. And we do question the usefulness of the rule for most appeals. But annulling it by footnote isn’t the answer. We’ve seen briefs kicked back for failing to follow it – for failing to do exactly what this brief didn’t: cite a statute. That’s what the court should have done here. When the beneficiaries faced it with its mistake this court made another – writing something that makes a joke either of its footnote or of the rule.)

(link to opinion)

This one is of limited interest but Division Two’s forays into civil law are rare enough to be mentioned.

The DPS stopped Plaintiffs’ decedent for DUI; her blood alcohol turned out to be over .20. As she was sitting in the DPS cruiser in the emergency lane of  I10 another vehicle hit it, killing her. Plaintiff sued the other driver and the DPS. Against the DPS Plaintiff lost at trial; the jury found the other driver 75% at fault and the decedent 25%. Plaintiff appealed. The Court of Appeals affirms.

The issue was whether the trial court should have instructed the jury on the qualified-immunity statute, 12-820.02(A)(7). Under it the State has no liability for negligence for the injury of a driver guilty of reckless driving or DUI.

Plaintiff argued that the decedent wasn’t a “driver” at the time of the accident. The Court of Appeals says that a “driver” is a person who drives. If the legislature had intended that the statute apply only to one in the act of driving it could have said so.

The statute requires that the injury be attributable to the violation. Plaintiff argued that if it applied here then it could be used to shield the State whenever a person held for DUI is injured in custody. The opinion says that its for the trial court to decide, depending on the facts, whether a chain of events is too attenuated to warrant the instruction.

It would be “absurd,” according to Plaintiff, if the officers’ liability depended on what violation they had pulled the decedent over for. The court doesn’t think it absurd; the legislature could conclude that the statute discouraged drunk driving.

Plaintiff also argued that the evidence of decedent’s very high alcohol level was irrelevant, inflammatory and cumulative. But reversing on an evidentiary ruling is tough even when the ruling isn’t consistent with the appellate court’s resolution of the principal issue. Plaintiff made things worse by having witnesses testify that, in effect, the decedent wasn’t really too drunk to drive, which the court also uses to justify admitting the evidence.

(link to opinion)