Articles Tagged with Trustee

The Arizona Trust Code at A.R.S. §14-11010(A) states that “Except as otherwise provided in the contract, a trustee is not personally liable on a contract properly entered into in the trustee’s fiduciary capacity in the course of administering the trust if the trustee in the contract disclosed the fiduciary capacity.” This provision indicates that so long as the trustee has disclosed his representative capacity that the trustee is not personally liable UNLESS the trustee expressly makes himself or herself personally liable to a contract (i.e. by giving a personal guaranty). This provision is meant to protect trustees, properly acting on behalf of a trust, when entering into contracts with third parties for the benefit of the trust.

In a recent case, the protection of the trust from liability to a third party were challenged where the trustee was thought not to have clearly enough indicated she was operating solely in her representative capacity. In the case of Focus Point/Kantor v. Johnson/Oak Acres, 235 Ariz. 170, 330 P.3d 360 (App. 2014), the Court concluded on the specific facts of the case that the trustee was not personally liable for a breach of contract by the trust, where specific provisions of the listing agreement and the manner in which the listing agreement was signed made it clear enough that the trustee was acting in her representative capacity.

In Focus Point, the Trustee hired a realtor to assist selling a piece of commercial property titled in the name of the Trust. After the initial listing agreement was signed, the realtor requested a second listing agreement for a longer period of time. The second listing agreement was prepared by the realtor, and was not reviewed by the Trustee. The Trustee proceeded to sign her name without further specifying in her own handwriting that she was signing in her representative capacity. The opposing party initially obtained a jury trial judgment against the trustee personally. However, on appeal, the court set aside the personal judgment against the trustee for several reasons.