Court Opinion

ID: 806979
Source: CourtListenerOpinion
Date Created: 2012-08-20 16:04:17+00
Date Added: 2024-06-11T18:00:22.971203
License: Public Domain

FILED
                                                 United States Court of Appeals
                    UNITED STATES COURT OF APPEALS       Tenth Circuit

                           FOR THE TENTH CIRCUIT                       August 20, 2012

                                                                     Elisabeth A. Shumaker
                                                                         Clerk of Court
ACE INVESTORS, LLC

             Plaintiff-Appellee,

v.                                                         No. 11-4164
                                                (D.C. No. 2:08-CV-00289-TS-DN)
MARGERY RUBIN, as Trustee of the                            (D. Utah)
Rubin Family Irrevocable Stock Trust,

             Defendant.

v.

MARGERY RUBIN, as Trustee of the
Rubin Family Irrevocable Marital Trust,
MARGERY RUBIN, as Trustee of the
Rubin Family Irrevocable Realty Trust,

             Garnishees-Appellants.

                            ORDER AND JUDGMENT*

Before HOLMES, Circuit Judge, BRORBY, Senior Circuit Judge, and EBEL,
Circuit Judge.

*
      After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
      Margery Rubin, as Trustee of the Rubin Family Irrevocable Marital Trust

(“Marital Trust”), and Margery Rubin, as Trustee of the Rubin Family Irrevocable

Realty Trust (“Realty Trust”) (the Trustees of the Marital Trust and the Realty Trust

are jointly referred to as “Garnishees”), appeal from an order of restraint entered in a

garnishment proceeding. Exercising jurisdiction pursuant to 28 U.S.C. § 1292(a)(1),

we REVERSE and REMAND to the district court to VACATE the order of restraint

entered against the Garnishees.

                                      Background

      In 2008, Appellee Ace Investors, LLC (“Ace”) filed an action in federal court

in Utah against defendant Margery Rubin, as Trustee of the Rubin Family Irrevocable

Stock Trust (“Stock Trust”), to collect on a $1 million promissory note. Ms. Rubin,

in her capacity as the trustee of the Stock Trust, stipulated to entry of judgment

against the Stock Trust. In May 2010, the district court entered judgment against the

Stock Trust and in favor of Ace in the amount of $1,174,426.46.

      In April 2011, Ace applied for Writs of Garnishment to be served on the

Marital Trust and the Realty Trust, seeking to garnish property of the Stock Trust that

might be held by these other trusts and could be used to satisfy Ace’s judgment. The

Marital and Realty Trusts are New York trusts and their trustee, Ms. Rubin, lives in

New York. Ace moved for service of the writs by publication or other alternative

service. The district court granted that motion.

                                          -2-
      Counsel for the Garnishees entered a special appearance and objected to the

writs of garnishment asserting, among other grounds, that the Garnishees were not

subject to personal jurisdiction in Utah. Ace then filed a motion asking for various

forms of relief, including an order restraining Ms. Rubin from disposing of,

transferring, cancelling or otherwise interfering with any property of the Stock Trust,

the Realty Trust or the Marital Trust until $2 million in assets was determined to be

available in the three trust accounts. The magistrate judge held a hearing and then

ordered supplemental briefing on the jurisdictional issue.

      The magistrate judge then entered an order in which he concluded that the

court had personal jurisdiction over Ms. Rubin individually, and therefore it had

jurisdiction over all of the trusts of which she is a trustee. The magistrate judge also

entered the order of restraint that Ace had requested. The Garnishees objected to the

magistrate judge’s order and sought a stay of the order of restraint.

      The district court entered two separate orders. In the first order, the court

denied the motion for stay and entered its own order of restraint. In the second order,

the court overruled the objections to the magistrate’s order. The district court did not

discuss the magistrate judge’s personal jurisdiction determination, other than to state

that the “finding of jurisdiction was not contrary to law.” Aplt. App., Vol. 2 at 637.

The Garnishees now appeal from the district court’s orders.

                                          -3-
                                       Discussion

      On appeal, the Garnishees contend that the district court erred in entering the

order of restraint because the court lacked personal jurisdiction over the Garnishees.

“We review de novo questions of personal jurisdiction.” ClearOne Commc’ns, Inc.

v. Bowers, 651 F.3d 1200, 1214 (10th Cir. 2011).

      “Garnishment is a legal proceeding brought by a creditor (garnishor) of a

person (the debtor) against a third party (garnishee) to obtain property of the debtor

in the hands of the third party to satisfy the debt owed to the garnishor.” Millard v.

United States, 916 F.2d 1, 3 (Fed. Cir. 1990). In a garnishment proceeding, the court

must have jurisdiction over the third-party garnishee and the relevant property held

by the garnishee. See id.; Robbins, Coe, Rubinstein and Shafran, Ltd. v. Ro Tek, Inc.,

320 N.E.2d 157, 161 (Ill. Ct. App. 1974). A court may exercise personal jurisdiction

over a party based on the party’s citizenship or domicile in the state, the party’s

explicit consent, or when the party has sufficient contacts with the state “such that

the maintenance of the suit does not offend traditional notions of fair play and

substantial justice.” J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780,

2787 (2001) (internal quotation marks omitted).

      In this case, Ace is the creditor, the Stock Trust is the debtor and the Marital

and Realty Trusts are the third-party garnishees. As noted, Ms. Rubin is the trustee

for all three trusts, but the judgment in the original action was entered solely against

the Stock Trust. Jurisdiction in the original action was based on the promissory note

                                          -4-
in which Ms. Rubin, in her capacity as the Trustee of the Stock Trust, consented to

the “in personam jurisdiction of the courts of the State of Utah.” Aplt. App., Vol. 1

at 60. Although the district court’s analysis (via the magistrate judge) is abbreviated,

the court appeared to conclude that the consent-to-jurisdiction clause in the

promissory note gave the court jurisdiction not only over Ms. Rubin in her capacity

as the Trustee of the Stock Trust, but also over her personally and over all of the

trusts for which she was a trustee. As the court explained, “[a] trustee is a single

person, and the actions taken by a trustee are her own actions, not actions taken by

the trust, even when those actions are undertaken as a designated trustee” and

Ms. Rubin was “the person that signed the note.” Aplt. App., Vol. 2 at 599-600.

      The Garnishees contend that the district court erred in its personal jurisdiction

determination. While the Garnishees acknowledge that “the District Court had

limited specific personal jurisdiction over [Ms. Rubin], in her capacity as Trustee of

the Stock Trust, with respect to disputes arising from the Promissory Note,” the

Garnishees argue that “this specific jurisdiction did not extend to general personal

jurisdiction over Ms. Rubin as an individual or specific personal jurisdiction over

Ms. Rubin in her capacity as Trustee of the Non-Party Trusts.” Aplt. Br. at 12. We

agree with the Garnishees.

      The district court’s analysis reflects an antiquated view of the law of trusts.

To support its analysis, the district court cited to Ace’s memorandum in support of

jurisdiction, see Aplt. App., Vol. 2 at 599 n. 2, which in turn relied primarily on a

                                          -5-
case that is over one hundred years old, Taylor v. Mayo, 110 U.S. 330 (1884), see

Aplt. App., Vol. 2 at 430-31. Ace highlighted the following passage in its brief to the

court: “The trust estate cannot promise; the contract is therefore the personal

undertaking of the trustee. As a trustee holds the estate, although only with the

power and for the purpose of managing it, he is personally bound by the contracts

he makes as trustee, even when designating himself as such.” Id. (quoting Taylor,

110 U.S. at 334-334).

      The law of trusts, however, changed in the second half of the twentieth century

with many states enacting legislation to distinguish between the representative and

individual capacities of a trustee. See 4 Scott & Ascher on Trusts § 26.2, at 1874

(5th ed. 2007) (“[T]here is now a substantial body of authority, much of it statutory,

to the effect that a trustee who has signed a contract in a representative capacity is

liable only in a representative capacity, and not personally.”); id. at 1875 (explaining

that “during the second half of the twentieth century, [concerns with the traditional

scheme] gave rise to a profoundly different conception of trustee liability.”). Utah is

one of the states that has enacted such legislation. See Utah Code Ann. § 75-7-1010

(“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.”). Because Utah draws a distinction between a person acting in an

individual capacity, on the one hand, and, on the other, that same person acting in the

                                           -6-
capacity of a trustee, the district court’s personal jurisdiction determination is

contrary to Utah law.

       A court must focus on the particular capacity in which a party is being sued in

determining whether it has personal jurisdiction. See, e.g., Trujillo v. Williams,

465 F.3d 1210, 1218 n. 9 (10th Cir. 2006) (explaining that personal jurisdiction had

not been established over Virginia corrections officials in their personal capacities

and therefore court would consider the allegations against the Virginia defendants in

their official capacities). Here, Ms. Rubin has four distinct capacities: her personal

capacity, her representative capacity as the trustee of the Stock Trust, her

representative capacity as the Trustee of the Marital Trust, and her representative

capacity as the Trustee of the Realty Trust. Given these distinctions, the court may

not rely on its specific personal jurisdiction over Ms. Rubin in her capacity as the

trustee of the Stock Trust to exercise specific personal jurisdiction over Ms. Rubin in

her capacity as the Trustee for the Marital and Realty Trusts. Accordingly, the

district court may not order Ms. Rubin to restrain the assets of the Stock Trust that

may be held in the Marital and Realty Trusts when it does not have jurisdiction over

her in her representative capacity as the trustee for those trusts.

                                           -7-
      We REVERSE and REMAND to the district court to VACATE the order of

restraint entered against the Garnishees.1

                                                   Entered for the Court

                                                   Jerome A. Holmes
                                                   Circuit Judge

1
       We note that Ms. Rubin, in her capacity as the trustee of the defendant Stock
Trust, did not appeal from the order of restraint.

                                             -8-