VOLUME 24 NUMBER 20
Let’s say you have a disagreement with your sister, who is trustee of a trust your parents created. Your sister lives in Montana, though she has a winter home in Arizona. Your parents lived in Arizona when they died. They signed their wills and trust in Arizona, and their lawyer was in Arizona. If you have to sue your sister, which state has jurisdiction? In other words, do you bring your lawsuit in Arizona, Montana, or some other state?
The jurisdiction question comes up from time to time. We wrote about it just a couple years ago, after reading an Arizona Court of Appeals decision involving a court action filed by the out-of-state trustee in Arizona. But that was a case where the trustee wanted Arizona courts to have jurisdiction. What if the trustee didn’t want to be sued in Arizona?
That was the issue in a recent Arizona Court of Appeals decision. The reported decision leaves a few of the elements unspecified, but the outcome is clear. Let’s review the background. We’ll fill in some of the details missing from the decision with the likely facts.
The background information
Randolph and Jennie Barnett (not their real names) lived in Arizona when they created a joint revocable living trust. They named themselves as co-trustees. Upon the death of the first spouse to die, the survivor would be sole trustee and have the use of all the couple’s assets.
Mr. and Mrs. Barnett had three adult children — Jack, Emily and Terrence. On the second death, their original trust was set to divide into equal shares for those three children.
Randolph died in 2010. According to Emily and Terrence, Jack immediately began to isolate their mother, and (they allege) induced her to change her trust in 2012. That amendment (apparently signed in Arizona) made Jack the recipient of two-thirds of the trust on Jennie’s death, and left Terrence as a one-third beneficiary. That meant that Emily was completely disinherited.
A year later, Jennie resigned as trustee and named Jack as sole trustee. She died (apparently in Arizona) in 2014.
The lawsuit
Seven months after their mother’s death, Terrence and Emily filed a lawsuit in Arizona against Jack. They alleged that he had violated the Arizona law preventing exploitation of vulnerable adults, and demanded an accounting of the trust’s assets. Later, they sought to add an additional claim against Jack for “tortious interference with expectancy of inheritance.”
Jack raised several objections. He argued that Terrence and Emily could not bring a “vulnerable adult” claim on their own behalf — they would need to be Jennie’s conservators or personal representatives of her probate estate. Since she had died, they could not be appointed conservator, and no probate proceeding had been filed.
In addition, Jack pointed out that Emily had no standing to demand a trust accounting. She was no longer a beneficiary, having been disinherited by Jennie several years before.
The main objection from Jack, though, was about the court’s jurisdiction. Because he was a Maine resident, the Arizona court had no jurisdiction over him personally. He pointed out that there was no evidence that he administered the trust in Arizona, either.
Legal arguments
Terrence, in turn, pointed out that Jack spent about half of each year in Arizona. The trust’s primary asset was a brokerage account held in a brokerage account held with a Scottsdale company. He argued that the Arizona court had jurisdiction over Jack and the trust.
In response Jack noted that he had a job in Maine, that his driver’s license and primary address indicated Maine residency, and that the trust’s brokerage statements were mailed to his home in Maine. By Jack’s reckoning, the evidence all supported an argument that Maine had primary jurisdiction over the trust, and Terrence had not introduced any evidence to the contrary.
The probate court agreed with Jack and dismissed the lawsuit. Terrence and Emily appealed.
The Court of Appeals
Last month, the Arizona Court of Appeals upheld the dismissal of Terrence and Emily’s lawsuit. Each of Jack’s arguments prevailed.
The appellate judges agreed that Terrence and Emily had no standing to bring the “vulnerable adult” action in their own names. That claim belonged to Jennie herself. After her death her estate could have filed a lawsuit, but her children could not file in their own names.
Emily had not claimed that the trust was defective, and (since she was disinherited) she didn’t have any right to demand an accounting. Dismissal of her part of the lawsuit was appropriate.
Most non-lawyers are likely to be surprised by the central holding of the opinion, however. The Court of Appeals agreed that Arizona courts didn’t have any jurisdiction over the trust itself. The trust’s place of administration is apparently Maine; that is where Terrence would need to file his lawsuit. Boydston v. Boydston, April 11, 2017.
Wait. Maine?
Non-lawyers often have a hard time with the jurisdiction determination. It intuitively seems like the trust signed in Arizona, prepared by an Arizona attorney, is an “Arizona” trust. The document might even include a provision that directs that Arizona law applies. Shouldn’t Arizona courts have jurisdiction?
The legal concept of jurisdiction is really about where the trustee can be sued. If the trustee lives in another state (and the trust is administered in that state), then jurisdiction probably lies in that state.
Of course, a Maine (or Montana) trustee could consent to the Arizona courts’ jurisdiction, but it can not be forced. And if Terrence refiles in Maine (and the trust says that Arizona law applies), then the Maine courts may be in the position of determining and applying Arizona law.
The place of trust administration is not the only way for a court to take jurisdiction over a trustee, but it is the principal consideration. And the person filing the lawsuit has the obligation to show that jurisdiction lies in the state where the lawsuit is brought.
