December 8th, 2011
Of the many things trustees stay awake at night worrying about, I’m not sure where getting hauled into court in some far off jurisdiction fits on that list. Wherever it falls onto the list, it’s probably a few slots higher for successor trustees who always have to wonder to what extent they can be held liable for their predecessors’ acts.
Fortunately, as the New Hampshire Supreme Court made clear in Fellows v. Colburn, when it comes to personal jurisdiction – and getting hauled into court in some far off jurisdiction – only your own acts count, not those of your predecessor trustee.
In 1981, Marvin and Thelma Tennant, and their sister, Barbara Tennant, purchased a residential property in Concord, New Hampshire. Ten years later, Marvin and Thelma executed the Tennant Family Trust, naming themselves as co-trustees and Richard and Ronald Tennant as successor co-trustees. The trust was prepared by a Florida attorney, executed in Florida, and listed Marvin and Thelma as Florida residents. Ultimately, the Concord property was conveyed to the trust by warranty deed executed in Florida and notarized by a Florida notary.
Four years after the Concord property was conveyed to the trust, the New Hampshire Division of Public Health Services Childhood Lead Poisoning Prevention Program issued an order of abatement ordering Marvin and Thelma to get rid of the lead paint contamination at the Concord property. They didn’t. Instead, four years after the order of abatement, Marvin and Thelma, as co-trustees of the trust, sold the Concord property to Jesus and Eileen Guzman without notifying the Guzmans of the lead paint abatement order.
After they sold the Concord property, Marvin and Thelma executed a restatement of trust agreement, amending and restating the trust. Again, the restated trust was executed in Florida, named Marvin and Thelma as co-trustees, and named Richard Tennant and Robin Tennant Colburn as successor trustees. Robin resided in Illinois. Richard Tennant was a resident of Florida, who spent parts of the year in Massachusetts. Ronald was a resident of Colorado.
In 2003, the Guzmans sold the Concord property to Richard and Cheryl Fellows and Benjamin Bellerose without informing them of the lead paint problem or abatement order at the time of that sale. The Guzmans allegedly never became aware of the lead paint problems at the Concord property.
Thelma died in 2004 and Marvin resigned as trustee. So, Richard Tennant and Robin became successor co-trustees. In 2006, a final distribution was made from the trust.
In 2009, the Fellows and Bellerose sued Richard Tennant, Ronald, and Robin alleging violations of federal law and negligence and/or intentional misrepresentation by the trust and Marvin and Thelma as co-trustees. The successor trustees moved to dismiss arguing that the courts of New Hampshire lacked personal jurisdiction over them.
The trial court ruled that it had jurisdiction over the successor trustees in their fiduciary capacities and over all the beneficiaries of the trust. The New Hampshire Supreme Court reversed.
In order for a nonresident trustee (and trust beneficiary) to be called into court in New Hampshire to defend an action involving a trust, it must have minimum contacts with the forum state. Because personal jurisdiction is such a fact specific inquiry, let’s take a look at which facts were important to the Supreme Court’s decision.
- The plaintiffs failed to present any evidence to indicate that the successor trustees were in any way involved with the sale that formed the basis of the plaintiffs’ claims in the litigation. Furthermore, the plaintiffs conceded that there was no evidence that Robin or Richard Tennant ever knew about the lead paint problem or abatement orders.
- Although Robin and Richard accepted appointment as successor trustees, their acceptance came four years after the sale of the Concord property, and without a showing of any prior involvement with the Concord property as it related to the litigation or to any active administration of the trust. It is not enough to prove that a defendant merely agreed to act as trustee of a trust.
- With respect to jurisdiction over beneficiaries of the trust, the mere receipt of trust assets, over six years after the sale of the Concord property, without any further contacts with New Hampshire or the litigation, was not a strong enough basis to assert jurisdiction over the trust beneficiaries. There was no evidence that any trust assets remained in New Hampshire after the sale of the Concord property, and, thus, receipt of proceeds from that sale six years later was too attenuated a financial benefit to justify subjecting the trust beneficiaries to personal jurisdiction in New Hampshire.
- The contacts of the trust, itself, or Marvin and Thelma, as initial co-trustees, could not establish personal jurisdiction over the successor trustees. Each defendant’s contacts with the forum state must be independently assessed.
Now, this decision doesn’t mean that the successor co-trustees couldn’t be sued for Marvin and Thelma’s alleged misconduct. All it means is that the successor co-trustees couldn’t be sued in New Hampshire for their predecessors’ conduct.
The question that the New Hampshire Supreme Court did not address is what duty do successor trustees have to investigate the acts of their predecessors? If Robin and Richard had accepted their appointment as successor trustees after litigation had been filed or when it was likely that litigation would be filed, they probably would have been stuck defending a lawsuit in New Hampshire. If the successor trustees did have a duty to investigate past acts of the predecessor trustees, then the “foreseeability” of being called into court in New Hampshire would have increased if that investigation revealed – or should have revealed – the potentially problematic details of the sale of the Concord property.