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Bazazzadegan v. Vernon

Court of Appeals of Arkansas, Division IV

October 30, 2019

Julia BAZAZZADEGAN; Cannon Holdings, LLC; Ozark Mountain Publishing, Inc.; and Quantum Healing Hypnosis Academy, LLC, Appellants
v.
Nancy VERNON, Individually and as Cotrustee of the Dolores E. Cannon Living Trust and on Behalf of Cannon Holdings, LLC, Appellees

         APPEAL FROM THE MADISON COUNTY CIRCUIT COURT [NO. 44CV-18-129], HONORABLE DOUG MARTIN, JUDGE

         James, House, Downing & Lueken, P.A., by: Matthew R. House, Little Rock, for appellants.

         Conner & Winters, LLP, Fayetteville, by: G. Alan Wooten and Michael D. Sutton, for appellees.

          OPINION

         BRANDON J. HARRISON, Judge

          In 2018, Nancy Vernon, a successor cotrustee and beneficiary of the Dolores E. Cannon Living Trust, sued her sister Julia Bazazzadegan, who is also a successor cotrustee and a beneficiary of the trust. Nancy alleged that Julia (1) committed a breach of trust as cotrustee, (2) breached her fiduciary duties as a corporate officer, and (3) misappropriated funds and unjustly enriched herself so that Nancy was entitled to a constructive trust.[1] Julia moved the circuit court to order the dispute to mediation or arbitration, arguing that the settlor (the sisters’ mother) intended that course. This interlocutory appeal, which we review de novo and presents an issue of first impression, asks whether the circuit court erred when it denied Julia’s motion to compel mediation or arbitration. Ark. R. App. P.-Civ. 2(a)(12) (2019); Gibbons v. Anderson, 2019 Ark.App. 193, 575 S.W.3d 144.

          I. The Trust’s Alternative-Dispute-Resolution Provisions

          The Dolores E. Cannon Living Trust was created on 4 April 2014, and Dolores Cannon was the settlor and sole trustee before she died. When Dolores died her daughters Nancy Vernon and Julia Bazazzadegan became successor cotrustees pursuant to section 3.03 of the trust. Each daughter accepted the role. The trust contains three provisions that discuss alternative-dispute resolution (ADR). They are the focus of this appeal.

Article Twelve outlines the trustees’ powers. In particular, Section 12.24 states,
My Trustee may settle any claims and demands in favor of or against the trust by compromise, adjustment, arbitration or other means. My Trustee may release or abandon any claim in favor of the trust.
Article Eleven governs trust administration. In particular, Section 11.04 states,

          Section 11.04 No Court Proceeding

My Trustee shall administer this trust with efficiency, with attention to the provisions of this trust, and with freedom from judicial intervention. If my Trustee or another interested party institutes a legal proceeding, the court will acquire jurisdiction only to the extent necessary for that proceeding. Any proceeding to seek instructions or a court determination may only be initiated in the court with original jurisdiction over matters relating to the construction and administration of trusts. Seeking instructions or a court determination is not to be construed as subjecting this trust to the court’s continuing jurisdiction.
I request that any questions or disputes that arise during the administration of this trust be resolved by mediation and, if necessary, arbitration in accordance with the Uniform Arbitration Act. Each interested party involved in the dispute, including any Trustee involved, may select an arbiter and, if necessary to establish a majority decision, these arbiters may select an additional arbiter. The decision of a majority of the arbiters selected will control with respect to the matter.

          The third section of the trust that directly relates to the ADR issue is Section 11.14. It provides that cotrustees must agree unanimously on an action unless the trust provides otherwise. Absent unanimous agreement between cotrustees, the settlor expressly "request[ed] that the matter be settled by mediation and then by arbitration, if necessary[.]" Note that Sections 11.14 and 11.04 impose an order of ...


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