Court Opinion

ID: 2827991
Source: CourtListenerOpinion
Date Created: 2015-08-18 16:17:05.466679+00
Date Added: 2024-06-11T11:31:29.431507
License: Public Domain

IN THE
            ARIZONA COURT OF APPEALS
                            DIVISION ONE

 ROBERT G. HOAG CHARITABLE REMAINDER UNITRUST DATED
  MARCH 4, 1994, a charitable remainder unitrust; ROBERT G. HOAG
CHARITABLE REMAINDER UNITRUST II DATED FEBRUARY 1, 1999, a
    charitable remainder unitrust; ROBERT G. HOAG CHARITABLE
 REMAINDER UNITRUST III DATED JANUARY 10, 2000, a charitable
  remainder unitrust; INTERNATIONAL BENEFITS MANAGEMENT
  CORPORATION, individually and as Purported Successor Trustee of
 ROBERT G. HOAG CHARITABLE REMAINDER UNITRUST DATED
   MARCH 4, 1994, ROBERT G. HOAG CHARITABLE REMAINDER
   UNITRUST II DATED FEBRUARY 1, 1999, and ROBERT G. HOAG
CHARITABLE REMAINDER UNITRUST III DATED JANUARY 10, 2000,
                               Petitioners

                                   v.

   THE HONORABLE COLLEEN L. FRENCH, Judge Pro Tem of the
SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County
             of Maricopa, Respondent Judge Pro Tem,

           WELLS FARGO BANK, N.A., Real Party in Interest.

                         No. 1 CA-SA 15-0167
                          FILED 8-18-2015

 Petition for Special Action from the Superior Court in Maricopa County
                            No. CV2014-003768
           The Honorable Colleen L. French, Judge Pro Tempore

                   REVERSED AND REMANDED
                                 COUNSEL

Gunderson Denton & Proffitt PC, Mesa
By Sterling R. Peterson and Larry A. Dunn
Counsel for Petitioners

Jaburg & Wilk PC, Phoenix
By Roger L. Cohen and Kathi M. Sandweiss
Counsel for Real Party in Interest

                                 OPINION

Presiding Judge Andrew W. Gould delivered the opinion of the Court, in
which Judge Patricia A. Orozco and Judge Peter B. Swann joined.

G O U L D, Judge:

¶1             Petitioner International Benefits Management Corporation
(“IBMC”), individually and as trustee of three Charitable Remainder
Unitrusts (the “Unitrusts”), seeks special action relief from the trial court’s
order denying its motion to dismiss for lack of personal jurisdiction. For
the reasons discussed below, we accept jurisdiction and reverse the trial
court’s order.

¶2            Robert J. Hoag created three Unitrusts between 1994 and 2000.
The Unitrusts were funded by shares of stock belonging to Hoag. Hoag
served as the trustee and administered the Unitrusts in Arizona until 2014.

¶3            In November 2012, Wells Fargo Bank N.A., obtained a $2.5
million default judgment against Hoag personally and against his living
trust, the Robert G. Hoag Revocable Living Trust. In December 2013, Wells
Fargo initiated garnishment proceedings to satisfy its judgment. During
the garnishment proceedings, Wells Fargo attempted to subpoena records
from several institutions it believed were holding Hoag’s
assets/distributions from the Unitrusts.

¶4            On February 4, 2014, Hoag resigned as the trustee of the
Unitrusts and appointed IBMC, a corporation organized under the laws
and operating out of the Bahamas, as successor trustee. To effect his
resignation as trustee, and IBMC’s designation and acceptance of
trusteeship, Hoag and DeVries met in Florida at that time. Hoag turned

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                 HOAG, et al. v. HON. FRENCH/WELLS
                         Opinion of the Court

over all records relating to the Unitrusts, and the parties signed the required
documents. Thereafter, IBMC administered the Unitrusts from its office in
the Bahamas.

¶5            After transferring trusteeship of the Unitrusts to IMBC in
February 2014, Hoag filed a Reply in support of his motion to quash the
subpoenas. In support of Hoag’s position, Devries, the president of IBMC,
sent a declaration to Hoag’s counsel in Arizona stating that IBMC would
not provide the documents requested by Wells Fargo.1

¶6            IBMC currently makes monthly distributions to Hoag in
Arizona. Specifically, IBMC pays (1) property taxes and insurance on
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Hoag’s house in Chandler, Arizona, (2) spousal maintenance to Hoag’s
former spouse, a resident of Arizona, and (3) the remaining balance of the
distribution to Hoag.

¶7            On June 20, 2014, Wells Fargo filed its current lawsuit. Wells
Fargo alleges that Hoag has fraudulently concealed his assets by
transferring them to the Unitrusts. IBMC and the Unitrusts were served on
January 30, 2015.

¶8             IBMC moved to dismiss Wells Fargo’s complaint for lack of
personal jurisdiction. The trial court denied the motion, concluding it had
personal jurisdiction over IBMC and the Unitrusts. IBMC now petitions
this court for special action relief from the trial court’s order.

                               DISCUSSION

I.     Special Action Jurisdiction

¶9           We accept special action jurisdiction in this case because
IBMC has no “equally plain, speedy, and adequate remedy by appeal.”
Ariz. R. P. Spec. Act. 1(a). “[A]n appeal inadequately remedies a trial
court’s improperly requiring a defense in a matter where it has no

1       IBMC stated it was not required to provide the documents because
(1) the assets of the Unitrusts belonged to the trusts, not Hoag, and (2) the
spendthrift provisions in the Unitrusts prohibited Wells Fargo from
holding the Unitrusts liable for Hoag’s debts.

2      The Unitrusts provide that IBMC, as trustee, shall pay Hoag, as
beneficiary during his lifetime, a set percentage of the “net fair market
value” of the assets belonging to each trust. The Unitrusts specify that these
amounts shall be paid to Hoag in monthly installments.

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                  HOAG, et al. v. HON. FRENCH/WELLS
                          Opinion of the Court

jurisdiction.” Polacke v. Superior Court in and for County of Maricopa, 170 Ariz.
217, 219 (App. 1991). Additionally, because this case involves “clear legal
principles and no disputed material facts regarding the jurisdictional
issue,” special action jurisdiction is appropriate. Id. at 219.

II.    Statutory Jurisdiction

¶10           The trial court determined it has personal jurisdiction
pursuant to A.R.S. § 14-10202(A). We review issues of statutory
interpretation de novo. Obregon v. Indust. Comm’n of Ariz., 217 Ariz. 612,
614, ¶ 9 (App. 2008).

¶11            When interpreting a statute, we must give effect to the
drafter’s intent; in doing so “we look to the plain language of the statute as
the best indicator.” State v. Pledger, 236 Ariz. 469, 471, ¶ 8 (App. 2015); see
also Stein v. Sonus USA, Inc., 214 Ariz. 200, 201, ¶ 3 (App. 2007). “[U]nless
the drafters provide special definitions or a special meaning is apparent
from the text,” we give the words and phrases of the statute their commonly
accepted meaning. Pledger, 236 Ariz. at 471, ¶ 8. “If the statute is clear and
unambiguous, we apply the plain meaning of the statute” without resorting
to statutory construction. Stein, 214 Ariz. at 201, ¶ 3. (citation omitted).

¶12           A.R.S. § 14-10202(A) states that a trustee submits to the
personal jurisdiction of Arizona courts by (1) “accepting the trusteeship of
a trust having its principal place of administration in [Arizona],” (2) “by
moving the principal place of administration to [Arizona],” or (3) “by
declaring that the trust is subject to the jurisdiction of the courts of
[Arizona].”

¶13          Wells Fargo argues that based on A.R.S. § 14-10202(A),
because the Unitrusts were being administered in Arizona prior to IBMC’s
appointment, IBMC submitted to the personal jurisdiction of Arizona when
it accepted appointment as trustee. Wells Fargo reasons that under the
statute, IBMC was required to expressly declare that the trusts were no
longer subject to the jurisdiction of Arizona’s courts in order to terminate
its submission to personal jurisdiction. We disagree.

¶14           The language of A.R.S. § 14-10202(A) provides that personal
jurisdiction over a trustee is tied to the principal place where the trust is
currently being administered. The statute does not refer to a trust that had
its principal place of administration in Arizona. The main clause of the
statute, “accepting the trusteeship,” describes present action. Similarly, the
clause “having its principal place of administration,” which modifies

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                 HOAG, et al. v. HON. FRENCH/WELLS
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“trust,” also describes present action.3 See A.R.S. § 14-10108 (stating that a
trust may designate any jurisdiction as its “principal place of
administration” as long as the “trustee’s principal place of business is
located in or a trustee is a resident of the designated jurisdiction,” or “[a]ll
or part of the [trust] administration occurs in the designated jurisdiction.”).

¶15            Thus, under the statute, when a trustee accepts an
appointment as trustee, if the principal place of administration remains in
Arizona, the trustee submits personally to the jurisdiction of Arizona
courts. However, if the principal place of administration is removed to a
jurisdiction outside of Arizona, unless the trustee expressly declares the
trust will be subject to personal jurisdiction in Arizona, the trustee does not
submit to personal jurisdiction in Arizona. See Fellows v. Colburn, 34 A.3d
552, 563 (N.H. 2011) (interpreting a substantially similar long-arm
jurisdiction statute and concluding that personal jurisdiction is “predicated
upon a finding that the trust’s principal place of administration” is the
forum state).

¶16            Accordingly, we conclude that because the Unitrusts are
administered by IBMC in the Bahamas, IBMC is not subject to personal
jurisdiction in Arizona pursuant to A.R.S. § 14-10202.

III.   Constitutional Jurisdiction

¶17           A.R.S. § 14-10202(c) specifies that there may be other methods
of obtaining jurisdiction over a trustee. Thus, in addition to finding it had
statutory jurisdiction, the trial court determined it had jurisdiction in
accordance with Rule 4.2(a) of the Arizona Rules of Civil Procedure. A trial
court’s ruling on personal jurisdiction is a question of law subject to de novo
review. Duckstein v. Wolf, 230 Ariz. 227, 233, ¶ 19 (App. 2012).

¶18           Under Rule 4.2(a), Arizona courts may exercise personal
jurisdiction to the maximum extent allowed by the United States
Constitution. “[T]he Due Process Clause of the Fourteenth Amendment
limits the exercise of personal jurisdiction by state courts over non-resident

3      See John Eastwood, Oxford Guide to English Grammar § 134 (7th ed.
2002 (discussing participles, and distinguishing between active participles
ending in “ing”, and past, or passive, participles ending in “ed”; also
discussing how a clause with an active participle indicates action at the
same time, or present, as the action of the main clause at issue in § 14-
10202(A)).

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                  HOAG, et al. v. HON. FRENCH/WELLS
                          Opinion of the Court

defendants.” Planning Group of Scottsdale, LLC v. Lake Mathews Mineral
Props., Ltd., 226 Ariz. 262, 266, ¶ 14 (2011) (citing Pennoyer v. Neff, 95 U.S.
714, 723-24 (1877)). A state court may exercise personal jurisdiction over a
non-resident defendant “only if that defendant has ‘sufficient contacts’ with
the forum state ‘such that the maintenance of the suit does not offend
“traditional notions of fair play and substantial justice.”’” Id. at ¶ 14 (citing
Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp. and Placement,
326 U.S. 310, 316 (1945)). Under the minimum contacts test the question is
whether, “[c]onsidering all of the contacts,” the “defendants engaged in
purposeful conduct for which they could reasonably expect to be haled into
that state’s courts with respect to that conduct[.]” Id. at 268, ¶ 25.

¶19            Personal jurisdiction may be either general or specific.
Beverage v. Pullman & Comley, LLC, 232 Ariz. 414, 417, ¶ 8 (App. 2013) (aff’d
as modified, 234 Ariz. 1 (2014)). General jurisdiction exists when a non-
resident defendant’s contacts with the forum state are continuous and
pervasive. Int’l Shoe, 326 U.S. at 318. If general personal jurisdiction exists,
then a non-resident defendant may be sued for claims that are entirely
separate from its contacts with the forum state. Id. Specific jurisdiction
exists only for the particular claim asserted and only where the activities in
the forum state giving rise to the claim establish the necessary minimum
contacts with the state to make the exercise of jurisdiction reasonable and
just. Beverage, 232 Ariz. at 417, ¶ 8, aff’d as modified, 234 Ariz. 1 (2014); Batton
v. Tennessee Farmers Mut. Ins. Co., 153 Ariz. 268, 271 (1987) (“When specific
jurisdiction is at issue, the minimum-contacts inquiry focuses on the
relationship between the defendant, the forum, and the litigation.”).
“Under either specific or general jurisdiction, ‘the constitutional touchstone
remains whether the defendant purposefully established “minimum
contacts” in the forum State.’” Williams v. Lakeview Co., 199 Ariz. 1, 3, ¶ 6
(2000) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985)).

¶20            The parties agree this case involves a question of specific
jurisdiction. Thus, for the purposes of personal jurisdiction, IBMC’s
contacts must result from actions it purposefully directs towards Arizona.
Batton, 153 Ariz. at 271 (quoting Burger King, 471 U.S. at 476 (emphasis in
original)) (“Jurisdiction is proper only if “the contacts proximately result
from actions by the defendant himself that create a ‘substantial connection’
with the forum State.”). “[C]asual or accidental contacts” by IBMC with
Arizona, “particularly those not directly related to” Wells Fargo’s lawsuit,
“cannot sustain the exercise of specific jurisdiction” in Arizona. Planning
Group, 226 Ariz. at 266, ¶ 16. To determine whether IBMC is subject to the
jurisdiction of Arizona, we examine the totality of its jurisdictional contacts.
Id. at 269, ¶ 29.

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                 HOAG, et al. v. HON. FRENCH/WELLS
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¶21           Viewed in totality, the undisputed jurisdictional facts do not
establish sufficient minimum contacts to confer personal jurisdiction over
IBMC in Arizona. IBMC did not purposefully direct its actions towards
Arizona.

¶22           The unilateral activities of a plaintiff do not establish the
requisite minimum contacts; the connection must arise from “the
defendant’s ‘purposeful’ conduct.” Planning Group, 226 Ariz. at 266, ¶ 16.
Thus, in determining whether IBMC purposely availed itself of Arizona as
a forum state, we focus on IBMC’s conduct as trustee, not Hoag’s conduct
as grantor/beneficiary or Wells Fargo’s as plaintiff. Hanson v. Denckla, 357
U.S. 235, 252-53 (1958); Nastro v. D’Onofrio, 263 F. Supp. 2d 446, 453 (D.
Conn. 2003); First American Bank of Virginia v. Reilly, 563 N.E.2d 142, 144
(Ind. Ct. App. 1990).

¶23          Here, IBMC has no offices or employees in Arizona; does not
transact, advertise or solicit business in Arizona; and administers the
Unitrusts from its office in the Bahamas. The trust assets are not located in
Arizona, and the parties signed the documents transferring trusteeship of
the Unitrusts in Florida. At the transfer, Hoag delivered all Unitrust
records to IBMC, removing the principal place of administration of the
Unitrusts from Arizona.

¶24            There is no evidence IBMC solicited appointment as trustee
or sought to intentionally create a fiduciary or business relationship with
Arizona. Phillips Exeter Acad. v. Howard Phillips Fund, 196 F.3d 284, 292 (1st
Cir. 1999) (stating that an out of state defendant’s agreement to act as trustee
of a trust, absent evidence the defendant reached out to create or solicit the
relationship with forum state, is insufficient to satisfy purposeful availment
requirement). Rather, IBMC simply accepted the appointment as trustee
and assumed the existing duties of the trustee under the Unitrusts. Such
conduct is not equivalent to actively soliciting business in Arizona, and is
an insufficient basis for Arizona to obtain personal jurisdiction over IBMC.
See Rose v. Firstar Bank, 819 A.2d 1247, 1252, 1254 (R.I. 2003) (stating that in
assuming trusteeship of trust where the beneficiaries were located in the
forum state, “the trustee has not purposely availed itself of the benefits of
doing business in that new jurisdiction; rather, the trustee has simply opted
to continue servicing the preexisting trust business that it or its
predecessors obtained elsewhere.”); see also Williams v. Lakeview Co., 199
Ariz. 1, 5-6, ¶ 14 (2000) (concluding that “a causal nexus between the
defendant’s solicitation activities and the plaintiff’s claims” is a better-
reasoned basis for exercising personal jurisdiction).

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                 HOAG, et al. v. HON. FRENCH/WELLS
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¶25           IBMC did not, as Wells Fargo contends, intentionally solicit
business in Arizona simply because it knew Hoag resided in Arizona. A
trustee’s “decision to assume the duties of trustee with knowledge that all
beneficiaries” reside in the forum state is not “the legal equivalent for
jurisdictional purposes of expanding its business operations” into the
forum jurisdiction. Rose, 819 A.2d at 1254-55. See Phillips Exeter, 196 F.3d
at 292 (holding that “it is not enough to prove that a defendant agreed to
act as the trustee of a trust that benefitted a resident of the forum state.
Without evidence that the defendant actually reached out to the plaintiff's
state of residence to create a relationship—say, by solicitation,—the mere
fact that the defendant willingly” accepted an appointment as a trustee
“does not carry the day.”)

¶26            Additionally, IBMC did not purposely avail itself of Arizona
by periodically communicating with Hoag in Arizona, or by sending trust
payments and documents to Arizona. The trustee’s acts in sending trust
payments and documents into the jurisdiction where the settlor resides are
insufficient as a matter of law to constitute minimum contacts. Hanson, 357
U.S. at 252-53; see also Rose, 819 A.2d at 1255 (bank’s periodic mailings of
trust-account statements and checks to the beneficiaries in forum state,
together with any occasional telephone calls that related thereto, did not
constitute minimum contacts); In the Matter of the Estate of Ducey, 787 P.2d
749, 752 (Mont. 1990) (payment of benefits into forum state as well as
routine oral and written contacts relating to payments and trust account
statements were insufficient to establish requisite minimum contacts);
Fellows v. Colburn, 34 A.3d 552, 560-61 (N.H. 2011) (same).

¶27           Wells Fargo also argues that IBMC’s act of sending its
declaration to Hoag’s attorney in support of Hoag’s efforts to quash Wells
Fargo’s subpoenas seeking to garnish the Unitrust income was sufficient to
establish the necessary minimum contacts. Wells Fargo seeks to liken
IBMC’s declaration to an opinion letter written to advise Hoag, and
characterizes such an action as being directed at the forum state. In support
of this argument, Wells Fargo relies on Beverage v. Pullman, 232 Ariz. 414.
In Beverage, an out-of-state law firm issued an opinion letter to an Arizona
client and the court determined it had personal jurisdiction over the firm
regarding the client’s reliance on the letter.

¶28           Beverage is distinguishable from this case on multiple
grounds. In Beverage, the law firm sent promotional material about the firm
to the client’s agent in Arizona in order to secure the client’s business.
Beverage, 232 Ariz. at 417, ¶ 11. The firm communicated with the client in
the course of its representation and drafted and issued an opinion letter

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                 HOAG, et al. v. HON. FRENCH/WELLS
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knowing the client would rely on the letter. Id. Here, there is no evidence
that IBMC took any steps to solicit Hoag, or any other Arizona residents, as
beneficiaries of the Unitrusts. Additionally, the letter written by IBMC was
not an opinion letter, was not written for Hoag’s benefit, and was not
intended to be relied on by Hoag. Furthermore, in Beverage, the contents of
the opinion letter were at the heart of the client’s claims against the firm;
here, the letter written by IBMC is a communication IBMC was required to
write in response to Wells Fargo’s actions, e.g., Wells Fargo’s subpoenas for
information concerning the Unitrusts. See Batton, 153 Ariz. at 274 (“[T]he
requisite minimum contacts are not established when the plaintiff's action
‘requires the defendant to send communications into th[e] forum.’”).

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                 HOAG, et al. v. HON. FRENCH/WELLS
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                             CONCLUSION

¶29           Accordingly, Wells Fargo has not shown evidence of
sufficient minimum contacts between IBMC and Arizona in order to justify
subjecting IBMC to personal jurisdiction in Arizona. We recognize the trial
court may have felt compelled to exercise its jurisdiction due to the nature
of the fund transfers.4 However, where there is no personal jurisdiction,
the court has no power to do so. Thus, we accept jurisdiction and grant
relief by reversing the trial court’s denial of IBMC’s motion to dismiss for
lack of personal jurisdiction, and remand for further proceedings consistent
with this opinion.

                                  :ama

4       Because it has not been alleged or briefed by the parties, we do not
reach the issue of whether personal jurisdiction would exist if IBMC had
intentionally assisted Hoag in fraudulently concealing his assets by
removing them from Arizona.            We note that, depending on the
circumstances of a particular case, such conduct may be sufficient to create
the minimum contacts required for personal jurisdiction. Reilly, 563 N.E.2d
at 145; Johnson v. Witkowski, 573 N.E.2d 513, 523-24 (Mass. App. Ct. 1991).

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