                      NOTICE: NOT FOR OFFICIAL PUBLICATION.
  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                  AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.




                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE


                                 In the Matter of:

   YVONNE BOOK, BRUCE REIGELSPERGER, KEVIN O’CONNELL
                         TRUST
              _____________________________

        BART V. WHILES, et al., Plaintiffs/Appellees/Cross-Appellants,

                                         v.

  GORDON KEITH JONES, et al., Defendants/Appellants/Cross-Appellees.

                              No. 1 CA-CV 18-0296
                               FILED 6-6-2019


            Appeal from the Superior Court in Maricopa County
                           No. PB2014-070659
                 The Honorable Andrew G. Klein, Judge

       AFFIRMED IN PART; VACATED IN PART; REMANDED


                                    COUNSEL

Kenneth M. Rudisill Attorney at Law, Peoria
By Kenneth M. Rudisill
Counsel for Plaintiffs/Appellees/Cross-Appellants
Kile & Kupiszewski Law Firm, L.L.C, Scottsdale
By Stephen J. P. Kupiszewski, Emily B. Kile, Jennifer L. Kupiszewski,
Christina M. Stoneking
Co-Counsel for Defendants/Appellants/Cross-Appellees

The Law Office of Libby Banks, Scottsdale
By Libby Hougland Banks
Co-Counsel for Defendants/Appellants/Cross-Appellees



                      MEMORANDUM DECISION

Judge Kenton D. Jones delivered the decision of the Court, in which Acting
Presiding Judge Maria Elena Cruz and Judge Jennifer B. Campbell joined.


J O N E S, Judge:

¶1             At issue in this case is whether a settlement agreement
entered into between co-trustees Gordon L. Jones (Gordon), deceased, and
Gordon Keith Jones (Keith) (collectively, the Joneses) and four primary
beneficiaries of a trust is binding upon successor trustees when the
contingent beneficiaries were not parties to the settlement agreement.
Keith, along with his wife, family, and Gordon’s estate (collectively,
Appellants), appeal the trial court’s order denying their petition to enforce
the settlement agreement against Bart Whiles and Clark Leuthold
(collectively, the Successor Trustees). Both parties appeal the court’s order
denying their requests for an award of attorneys’ fees. For the following
reasons, we affirm the order denying the petition to enforce the settlement
agreement, vacate the order denying attorneys’ fees, and remand for further
proceedings.

                FACTS AND PROCEDURAL HISTORY

¶2             In 2008, Kevin O’Connell established a revocable trust (the
Trust), in which he designated $2.1 million to be paid in specific cash gifts
to four long-time employees (collectively, the Primary Beneficiaries) within
“thirty days from the Trustor’s death.” The remainder of the Trust assets
were to be distributed to Saint Leo University and Marquette University
(collectively, the Contingent Beneficiaries) in designated percentages.

¶3            O’Connell died in 2011 and Gordon assumed his designated
role as trustee. About a month later, Gordon appointed his son, Keith, as


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                       WHILES, et al. v. JONES, et al.
                          Decision of the Court

co-trustee but did not distribute the four specific gifts to the Primary
Beneficiaries. In 2014, two of the four Primary Beneficiaries filed a
complaint against the Joneses, alleging they breached their fiduciary duties
through waste and self-dealing. In this, the 2014 Case, the Primary
Beneficiaries sought removal of the Joneses as trustees and an award of
damages. By the time the 2014 Case settled, another of the Primary
Beneficiaries had intervened. And although the fourth did not participate
in the litigation or negotiations, he signed the settlement agreement after it
had been reduced to writing. The Contingent Beneficiaries appeared
through counsel but did not participate in, nor become signatories to, the
settlement agreement.

¶4            The terms of the settlement, as relevant here, provided that:
(1) the signatories were settling “all claims known and unknown,
liquidated and unliquidated, foreseen and unforeseen that would in any
way arise out of the claims and disputes that have been asserted in [the 2014
Case],” (2) “[m]utual releases w[ould] be given by the beneficiaries to the
Trust, and the releases w[ould] inure to the benefit of Gordon and Keith
individually, personally and in their fiduciary capacities,” (3) releases
would “also be given to all of the parties’ successors, assigns and
attorneys,” (4) the Joneses would resign as co-trustees and be replaced by
the Successor Trustees, and (5) the Primary Beneficiaries would receive
$50,000 from a company that had received a $400,000 loan from the Trust,
and another $5,000 each from Gordon personally. Finally, the Joneses
waived “any Trustee’s fees, Trust administrative expenses, consulting
expenses, or any other monies they believe[d] may be due them from the
Trust.” The agreement also included specific language acknowledging that
the Contingent Beneficiaries were not parties to the settlement and were not
bound by it.

¶5            In December 2015, the Successor Trustees filed a complaint
against the Joneses and several other parties, alleging breach of fiduciary
duty, fraud, conspiracy to defraud the Trust and beneficiaries, and aiding
and abetting a conspiracy to defraud. In response to this, the 2015 Case,
Appellants filed a petition to enforce the settlement agreement and dismiss
the 2015 Case. The trial court denied the petition to enforce and ordered
the parties to bear their own attorneys’ fees and costs. Appellants timely
appealed the final judgment, and the Successor Trustees timely cross-




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                       WHILES, et al. v. JONES, et al.
                          Decision of the Court

appealed the order denying attorneys’ fees. We have jurisdiction pursuant
to Arizona Revised Statutes (A.R.S.) §§ 12-120.21(A)(1)1 and -2101(A)(1).

                                DISCUSSION

I.     Standard of Review

¶6              General principles of contract law govern determinations
concerning the validity, interpretation, and scope of settlement agreements.
Emmons v. Superior Court, 192 Ariz. 509, 512, ¶ 14 (App. 1998) (citing Hisel
v. Upchurch, 797 F. Supp. 1509, 1517 (D. Ariz. 1992)). We review de novo
whether a settlement agreement is enforceable. See Estate of DeCamacho ex
rel. Guthrie v. La Solana Care & Rehab, Inc., 234 Ariz. 18, 20, ¶ 9 (App. 2014)
(citations omitted). We will affirm the trial court’s decision if it is correct
for any reason. U.S. Insulation, Inc. v. Hilro Constr. Co., 146 Ariz. 250, 256
(App. 1985) (citing Gary Outdoor Advert. Co. v. Sun Lodge, Inc., 133 Ariz. 240,
242 (1982), and Rancho Pescado, Inc. v. Nw. Mut. Life Ins., 140 Ariz. 174, 178
(App. 1984)).

II.    The Primary Beneficiaries Sued the Joneses Both as Individuals
       and in Their Representative Capacities in the 2014 Case.

¶7             The Successor Trustees argue the Joneses were only sued as
individuals in the 2014 Case, not in their capacities as co-trustees, and
therefore had no authority to bind the Successor Trustees to the terms of the
settlement agreement. Generally, a common-law trust is not considered a
legal entity capable of suing or being sued; therefore, any suit involving the
trust must be brought by or against its trustee. See, e.g., Millennium Square
Residential Ass’n v. 2200 M St. L.L.C., 952 F. Supp. 2d 234, 243 (D.C. Cir. 2013)
(citations omitted); see also 76 Am. Jur. 2d Trusts § 601 (2019) (“In most
jurisdictions, a trust is not an entity separate from its trustees, and cannot
sue or be sued in its own name, and therefore, the trustee, rather than the
trust, is the real party in interest in litigation involving trust property.”).
Additionally, if a trustee breaches his fiduciary duties, he may be
personally liable for the resulting loss to the trust assets. Shriners Hosps. for
Crippled Children v. Gardiner, 152 Ariz. 527, 528 (1987) (citations omitted).
Thus, depending upon the nature of the claims and remedies sought by
beneficiaries, a trustee may be sued in a representative capacity, as an
individual, or both.



1      Absent material changes from the relevant date, we cite the current
version of rules and statutes.


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                        WHILES, et al. v. JONES, et al.
                           Decision of the Court

¶8             The record here reflects that the Joneses were sued both as
individuals and in their representative capacities in the 2014 Case. The
Successor Trustees note that the 2014 Case caption only listed the
defendants as individuals, rather than “as trustees,” and therefore assert
the Trust was not a party to the settlement. However, a party is not required
to allege “a party’s capacity to sue or be sued” or “authority to sue or be
sued in a representative capacity” in a pleading unless it is necessary to
establish jurisdiction. Ariz. R. Civ. P. 9(a); see also Ariz. R. Probate P. 3(A)
(stating the Arizona Rules of Civil Procedure apply to probate proceedings
“[u]nless otherwise provided . . . or inconsistent with” the Arizona Rules of
Probate Procedure). “The rationale behind this rule is that the nature of the
plaintiff’s cause of action can be determined from the body of the
complaint.” Colo. Springs Cablevision, Inc. v. Lively, 579 F. Supp. 252, 255 (D.
Colo. 1984) (analyzing the analogous federal rule); see also Edwards v. Young,
107 Ariz. 283, 284 (1971) (“Because Arizona has substantially adopted the
Federal Rules of Civil Procedure, we give great weight to the federal
interpretations of the rules.”) (citing Jenney v. Ariz. Express, Inc., 89 Ariz. 343,
349 (1961), and Harbel Oil Co. v. Steele, 80 Ariz. 368, 373-74 (1956)).

¶9             In fact, the nature of the 2014 Case is easily ascertained from
the allegations in the complaint, which refers to the Joneses collectively as
“Trustees” or, individually, as “Successor Trustee” or “Co-Trustee”
throughout. The complaint also contains averments as to what the Primary
Beneficiaries should have received as “principal beneficiaries of the Trust”
and claims as to what the then-acting trustees failed to do or did
improperly. The Primary Beneficiaries sought remedies relating to the
management of the Trust — including the removal of the Joneses as co-
trustees, or alternatively, the appointment of a special fiduciary — as well
as monetary damages for the breach of fiduciary duty that arose from the
Joneses’ positions as co-trustees. The complaint also specifically sought
judgment against “defendant Trustees.” Thus, it is clear from the body of
the complaint that the Joneses were sued both as individuals and in their
representative capacities.

¶10            The Successor Trustees nonetheless argue that even if the
caption of the complaint is not controlling as to the Joneses’ role, the
acceptance of service demonstrates that they appeared in the litigation only
in their individual capacities and not “as trustees.” The Successor Trustees
thus argue the trial court in the 2014 Case did not obtain jurisdiction over
the Joneses in their representative capacities. We disagree. Personal
jurisdiction may be obtained through voluntary appearance and “ha[s] the
same force and effect as if a summons had been issued and served.” Ariz.
R. Civ. P. 4(f)(3), (4). The record shows the Joneses appeared in the 2014


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                       WHILES, et al. v. JONES, et al.
                          Decision of the Court

Case both as individuals and in their representative capacities. First, the
Joneses successfully opposed the Primary Beneficiaries’ motion to appoint
a special fiduciary. In doing so, they acknowledged having been sued as
co-trustees when they defended their conduct in operating the Trust. Later,
in opposing a motion to reconsider, the Joneses took similar positions, again
asserting that they, as co-trustees, “[were] administering the Trust
according to its terms.”

¶11         The dual capacity of the Joneses in this litigation is also
evidenced by the terms of the settlement agreement, which provided:

       •   Releases from the Primary Beneficiaries would inure to
           the benefit of Gordon and Keith individually, personally,
           and in their fiduciary capacities.

       •   The Joneses would resign as co-trustees of the Trust.

       •   The Joneses waived any trustee fees, Trust administrative
           expenses, consulting expenses, or any other monies they
           believed due them from the Trust, presumably as
           compensation for their services as co-trustees.

       •   For two cars leased to a Trust business, Gordon would
           arrange with the leasing company to transfer the leases
           into his own name.

These settlement provisions clearly related to Trust property and
contemplated action by and on behalf of the Trust. The only manner by
which the Joneses could have agreed to these terms was in their
representative capacities as co-trustees.

¶12          On this record, the trial court erred in finding the Joneses only
entered the settlement agreement as individuals. We nevertheless affirm
the determination that the settlement agreement is not enforceable because,
as explained below, its terms are antagonistic toward the interests of the
non-party Contingent Beneficiaries.

III.   The Settlement Agreement is Unenforceable.

¶13            “It is a fundamental tenet of American law that a non-party is
simply not bound by a judgment in an action to which it was not a party.”
State ex rel. Napolitano v. Brown & Williamson Tobacco Corp., 196 Ariz. 382,
386, ¶ 17 (2000) (Martone, J., concurring); accord Restatement (Second) of
Judgments § 62 cmt. a (Am. Law Inst. 2019). More specifically, “[a]


                                      6
                        WHILES, et al. v. JONES, et al.
                           Decision of the Court

judgment in a suit in which the beneficiary should be, but is not made a
party, does not bind him or his interest in the trust res.” Only Collections,
Inc. v. Cty. of Cochise, 121 Ariz. 310, 312 (App. 1978) (citing Johnson v. Curley,
257 P. 163, 164 (Cal. Dist. Ct. App. 1927), and Gibson v. Ledwitch, 114 P. 851,
852 (Kan. 1911)). “A beneficiary must be made a party to any litigation
involving his interest if the trustee or other beneficiaries are antagonistic to
it. Id. (collecting cases). “[T]he precise nature of the beneficial property
interests of the beneficiaries need not be ascertained, as any interest,
whether vested or contingent, is sufficient to protect the trust fund and see
that the trust is properly executed.” Schuster v. Schuster, 75 Ariz. 20, 29
(1952) (citing Johnson v. Superior Court, 68 Ariz. 68, 71 (1952)).

¶14            Here, the Contingent Beneficiaries maintain an interest in the
Trust property. But the Contingent Beneficiaries were not parties to the
settlement agreement and therefore have not released the Joneses from
liability for their purported misconduct as co-trustees. Therefore, the
settlement agreement in the 2014 Case does not preclude the Successor
Trustees from fulfilling fiduciary duties on behalf of the Contingent
Beneficiaries through the 2015 Case.

¶15            Nor are we willing to condone the Joneses’ attempt to insulate
themselves from the consequences of their alleged misconduct by
interpreting A.R.S. § 14-1406(4) (permitting a trustee to represent and bind
beneficiaries of a trust “[t]o the extent there is no material conflict of
interest”) to foreclose the Successor Trustees from bringing claims on the
Contingent Beneficiaries’ behalf. To the contrary, we find the releases, as
applied to the Successor Trustees, violate legislation and public policy and
are therefore unenforceable. See 1800 Ocotillo, L.L.C. v. WLB Grp., Inc., 219
Ariz. 200, 202, ¶ 7 (2008) (“Contract provisions are unenforceable if they
violate legislation or other identifiable public policy.”) (citing Webb v.
Gittlen, 217 Ariz. 363, 366, ¶ 13 (2008), and Restatement (Second) of
Contracts § 178 (Am. Law Inst. 1981)); cf. A.R.S. § 14-10802(B) (providing
that a transaction involving the management of trust property “that is . . .
affected by a conflict between the trustee’s fiduciary and personal interests
is voidable by a beneficiary affected by the transaction”). Barring the
Successor Trustees from asserting the Contingent Beneficiaries’ surviving
claims against the Joneses would result in violation of A.R.S. § 14-10802(A),
which requires a trustee to “administer the trust solely in the interests of
the beneficiaries,” as well as A.R.S. § 14-10811, which requires the trustee to
“take reasonable steps to enforce claims of the trust.” Accordingly, we hold
that the settlement agreement cannot be applied to prevent the Successor
Trustees from bringing the 2015 Case on behalf of the Contingent
Beneficiaries.


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                       WHILES, et al. v. JONES, et al.
                          Decision of the Court

¶16            Typically, “even if one part of a severable contract is void, the
court may enforce the remainder of the contract.” Mousa v. Saba, 222 Ariz.
581, 587, ¶ 25 (App. 2009) (citing Hackin v. Pioneer Plumbing Supply Co., 10
Ariz. App. 150, 157 (1969)). However, “[a] contract may be severed . . . only
if its terms clearly show the parties intended it to be severable. Id. (citing
Olliver/Pilcher Ins. v. Daniels, 148 Ariz. 530, 533 (1986)). The settlement
agreement at issue here does not include a severability provision or any
other language reflecting the intent to make the agreement severable. In
the absence of such terms, we find the entirety of the settlement agreement
unenforceable.

¶17           At oral argument, counsel for the Joneses suggested that
deeming the settlement agreement unenforceable would unravel every
action that occurred following the settlement agreement, including the
resignation of the Joneses and the appointment of Successor Trustees. We
find no precedent suggesting acts performed under contract automatically
unwind if it is later determined to be unenforceable. Rather, the proper
remedy, should any actual harm have occurred through the operation of
the settlement agreement, is typically some form of monetary damages. See,
e.g., W. Corr. Grp., Inc. v. Tierney, 208 Ariz. 583, 590, ¶ 27 (App. 2004)
(discussing the availability of quantum meruit damages when services are
performed under an unenforceable contract). Regardless, the claims and
consequences that might arise from our decision are beyond the scope of
this appeal.

IV.    Attorneys’ Fees

¶18           Both the Joneses and the Successor Trustees appeal the denial
of their requests for attorneys’ fees. We review the denial of an award of
attorneys’ fees for an abuse of discretion. See Sleeth v. Sleeth (In re
Guardianship of Sleeth), 226 Ariz. 171, 174, ¶ 12 (App. 2010) (citing Orfaly v.
Tucson Symphony Soc’y, 209 Ariz. 260, 265, ¶ 18 (App. 2004)). “An abuse of
discretion may occur when a trial court commits an error of law in the
process of exercising its discretion.” Kohler v. Kohler, 211 Ariz. 106, 107, ¶ 2
(App. 2005) (citing Fuentes v. Fuentes, 209 Ariz. 51, 56, ¶ 23 (App. 2004)).

¶19            Here, the trial court found the Successor Trustees were the
prevailing party in an action arising out of contract and entitled to a
discretionary award of attorneys’ fees pursuant to A.R.S. § 12-341.01(A).
The court then found the Joneses, as former co-trustees, were entitled to
reimbursement of their reasonable fees and costs related to the good faith
defense of a claim involving the administration of a trust pursuant to A.R.S.
§ 14-11004(A). Applying these “competing statutory provisions,” the court


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                       WHILES, et al. v. JONES, et al.
                          Decision of the Court

ordered each side to bear its own fees and costs. The court did not squarely
resolve the Joneses’ request for fees as a sanction pursuant to A.R.S. § 12-
349(A), and, accordingly, their request is deemed denied. See McElwain v.
Schuckert, 13 Ariz. App. 468, 470 (1970) (“[A] motion which is not ruled
upon is deemed denied by operation of law.”) (quoting Atchison, Topeka &
Santa Fe Ry. v. Parr, 96 Ariz. 13, 15 (1964)).

¶20           The Successor Trustees argue that because the trial court
found the Joneses had only settled the 2014 Case as individuals, the petition
to enforce the settlement agreement was filed in their capacities as
individuals, not as former trustees, thus barring recovery of attorneys’ fees
under A.R.S. § 14-11004(A). However, because we hold that the Joneses
entered the settlement agreement both in their representative capacity and
as individuals, see supra Part II, the Successor Trustees’ argument is without
merit.

¶21            We nonetheless conclude the trial court abused its discretion
in finding the Joneses filed the petition to enforce the settlement agreement
in good faith. “[T]he reference to ‘good faith’ requires an objective
determination based on all of the circumstances,” including whether the
litigation benefits the trust. Sleeth, 226 Ariz. at 178, ¶ 30 (citing Pierce v.
Molet (In re Estate of Gordon), 207 Ariz. 401, 406, ¶ 24 (App. 2004)). Evidence
of a benefit “may indicate good faith and is a factor to be considered, just as
the lack of benefit may reflect the absence of good faith.” Id. (citing Gordon,
207 Ariz. at 406, ¶ 26). But “[w]hen ‘winning’ a dispute results in lost
financial security for the protected person, those seeking an award of
attorney’s fees must defend the appropriateness of their decision to pursue
such an expensive dispute.” Id. at ¶ 31.

¶22            Here, the petition to enforce the settlement agreement did not
benefit the Trust or its beneficiaries in any conceivable way. Had the
Joneses prevailed, the Successor Trustees’ attempt to recover allegedly
misappropriated funds from the Joneses would have failed and the Joneses
would have successfully evaded liability for potential mismanagement of
Trust assets — all to the detriment of the beneficiaries. And where, as here,
the petition failed, the Successor Trustees nonetheless incurred significant
costs associated with defending against it — again, to the detriment of the
beneficiaries. The record contains no evidence to support a finding that the
Joneses pursued the petition to enforce the settlement agreement “in good
faith,” as the term is contemplated within A.R.S. § 14-11004(A). Therefore,




                                      9
                      WHILES, et al. v. JONES, et al.
                         Decision of the Court

the good-faith finding was error.2 Because the erroneous finding was the
only basis for denying the Successor Trustees an award of attorneys’ fees
pursuant to A.R.S. § 12-341.01(A), we cannot say the court acted within its
discretion. Accordingly, we vacate the trial court’s order denying fees and
remand for reconsideration.

                              CONCLUSION

¶23          The trial court’s order denying the petition to enforce the
settlement agreement is affirmed. The order denying attorneys’ fees is
vacated. The case is remanded for reconsideration of the fee requests.

¶24           Both parties request attorneys’ fees incurred on appeal. In our
discretion, we decline to award attorneys’ fees to either side. However, as
the prevailing party, we award the Successor Trustees their taxable costs
incurred on appeal upon compliance with ARCAP 21(b).




                            AMY M. WOOD • Clerk of the Court
                            FILED:    JT


2      Because we hold that the settlement agreement is not enforceable
against the Successor Trustees, the Joneses are not the successful party and
we need not address the Joneses’ request for attorneys’ fees pursuant to
A.R.S. §§ 12-341.01 and -349.


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