Opinion ID: 3064897
Heading Depth: 3
Heading Rank: 2

Heading: Trustees generally.

Text: [11] Biltmore’s second argument, that the general law of trusts shields its personal assets from liabilities incurred while acting as a representative for the trust, is correct. Trustees used to be personally liable, albeit with indemnity rights, for obligations incurred on behalf of the trust.48 But this doctrine has changed. Over the last few decades, the law has become more protective of trustees.49 The Uniform Trust Code, in force in Arizona, provides that the trustee is personally liable only if he is personally at fault for the obligation.50 Otherwise, the trustee is liable only in his representative capacity. Haskett v. Villas at Desert Falls, Inc.51 speaks to this issue, albeit in California rather than Arizona. The California Court of Appeal applied a California statute (identical to Arizona’s) to a nearly identical set of facts. A trustee filed a contract claim against an individual and a corporation.52 The complaint was dismissed, with attorneys’ fees and costs awarded against 48 Restatement (Second) of Trusts §§ 261, 265 (1959); Richardson v. Cortner, 105 So. 2d 456, 456 (Miss. 1958) (“When a party brings . . . a suit in his name in such representative capacity (trustee in a chattel deed of trust), he is individually liable for costs, insofar as the opposite party and the officers of the court are concerned.”). 49 See Restatement (Second) of Trusts §§ 265 cmt. a, 271A cmt. a (1959) (both noting “the modern trend” limiting a trustee’s personal liability); see generally, e.g., George Gleason Bogart et al., The Law of Trusts and Trustees § 732 (describing the evolution from the “Orthodox Common Law Rule—No Direct Representative Liability” to the “Statutory Trend Toward Direct Representative Liability”). 50 Ariz. Rev. Stat. Ann. § 14-11010(B) (West Supp. 2008) (“A trustee is personally liable . . . for obligations arising from ownership or control of trust property . . . only if the trustee is personally at fault.”); Unif. Trust Code § 1010(b), 7C U.L.A. 227 (Supp. 2003) (same). While the revision to the Arizona Trust Code only became effective this year, it continues the previous limitation of liability found in Arizona Revised Statutes Annotated § 14-7306(B) (2005) (repealed 2009). 51 108 Cal. Rptr. 2d 888 (Ct. App. 2001). 52 Id. at 892-93. BILTMORE ASSOCIATES v. TWIN CITY FIRE 8589 the trustee.53 The California Court of Appeal determined that the “trustee cannot be held personally liable . . . unless the party seeking to impose such personal liability on the trustee demonstrates that the trustee intentionally or negligently acted or failed to act in a manner that established a personal fault.”54 The court reached this conclusion based on California Probate Code § 18001, which contains the exact same language as Arizona Revised Statutes § 14-11010, “A trustee is personally liable for obligations arising from ownership or control of trust property only if the trustee is personally at fault.”55 The court explicitly rejected the argument that an “innocent third party creditor should not have to be concerned with the source of the fund that will be used to pay his claim.”56 The District of Columbia Circuit and several state courts have reached similar conclusions. In Pete v. United Mine Workers of America Welfare and Retirement Fund of 1950, the District of Columbia Circuit said that the “[t]rustees are before the court in their fiduciary capacities and thus bear no personal liability for the shifted attorney’s fees.”57 The highest courts of Maine and Missouri as well as intermediate courts in New York, Oregon, and Florida have held likewise.58 53 Id. 54 Id. at 898 (emphasis in original). 55 Id. at 897 (emphases in original). 56 Id. at 899. 57 517 F.2d 1275, 1279, 1292-93 (D.C. Cir. 1975) (en banc). 58 In re Estate of Ricci, 827 A.2d 817, 825-26 (Me. 2003) (clarifying that a personal representative of a deceased spouse is not personally liable for the plaintiff ’s attorney’s fees in a former spouse’s successful suit to enforce a support agreement); Jesser v. Mayfair Hotel, Inc., 360 S.W.2d 652, (Mo. 1962) (“The judgment should have run against the four surviving trustees not in their individual or personal capacity but as trustees representing the voting trust estate since the allowance of attorneys’ fees and expenses was proper as a charge or expense of the trust estate.”) (emphasis added); Skolnick v. Goldberg, 737 N.Y.S.2d 601, 602 (N.Y. App. Div. 2002) (“Since defendant’s decedent could only have brought and main8590 BILTMORE ASSOCIATES v. TWIN CITY FIRE [12] Biltmore’s prosecution of the lawsuit was not tortious or otherwise unlawful. The costs award against Biltmore, acting as the creditors’ committee trustee, was an ordinary cost, imposed on account of the statutory fee shifting provision in contract cases.59 The district court did not impose the fees as a sanction or for misconduct or negligence.60 Thus, Biltmore is entitled not to be liable for the money personally. The liability should, on remand, be imposed on Biltmore in its capacity as trustee of the Visitalk Creditors Trust.