The Arizona Court of Appeals Division One filed a decision in Hoag et al. v. Hon. French/Wells on August 18, 2015. The issue on appeal was whether Arizona obtained personal jurisdiction over a non-resident successor trustee pursuant to A.R.S. § 14-10202, where at the time the trustee accepted its appointment as successor trustee, the principal place of administration was in Arizona, but at the time the lawsuit was filed against the trustee the principal place of administration had been moved to another jurisdiction.
A.R.S. § 14-10202(A) allows “By accepting the trusteeship of a trust having its principal place of administration in this state or by moving the principal place of administration to this state, or until otherwise declared by the trustee if a proceeding regarding a matter involving the trust is not pending in a court of this state, by declaring that the trust is subject to the jurisdiction of the courts of this state, the trustee submits personally to the jurisdiction of the courts of this state regarding any matter involving the trust.”
In this case, the three Trusts at issue were created by Robert Hoag between 1994 and 2000 who funded those Trusts with stock he owned. Mr. Hoag administered these three Trusts and served as their trustee in Arizona until 2014. Wells Fargo obtained a $2.5 million judgment against Mr. Hoag personally along with another of his Trusts in November 2012. During December 2013, Wells Fargo initiated garnishment proceedings. Mr. Hoag resigned as trustee of the three Trusts on February 4, 2014 and appointed a corporation operating out of the Bahamas as successor trustee. Thereafter, the relevant Trusts have been administered from the Bahamas.
On June 4, 2014 Wells Fargo filed the underlying lawsuit and alleged that Mr. Hoag fraudulently concealed his assets by transferring them to these three Trusts. The Bahamian successor trustee was served and subsequently moved to dismiss for lack of personal jurisdiction. The court denied the motion. The Court of Appeals reversed and remanded upon special action jurisdiction.
Courts interpret statutes based upon the language therein. If a statute is clear, the plain meaning must be followed. Here, the words interpreted included “accepting trusteeship” and “having its principal place of administration,” both clauses describing present action, not past action. Because the principal place of administration was removed to the Bahamas and the successor trustee did not expressly declare that the Trusts would be subject to personal jurisdiction in Arizona, the successor trustee did not submit to personal jurisdiction in Arizona.
The Court also decided that the Bahamian successor trustee did not submit to personal jurisdiction based upon specific jurisdiction actions. It’s conduct as successor trustee, the fact that the assets are outside Arizona, and no actions occurred in Arizona as it related to transferring trusteeship duties and administration, did not rise to the level of sufficient minimum contacts.
The Court did note that they did not reach the issue of whether personal jurisdiction would exist if the Bahamian successor trustee had intentionally assisted Mr. Hoag in fraudulently concealing his assets by removing them from Arizona. This is separate and distinct conduct from the allegations that Mr. Hoag fraudulently concealed his assets by transferring them to the relevant Trusts. The Court noted that, depending on the circumstances of a case, such intentional conduct might be sufficient to create the minimum contacts necessary for personal jurisdiction.