Woods v. McCarty (In re McCarty)

In the Matter of: ROGER H. MCCARTY, ROGER MCCARTY TRUST,

THE ROGER MCCARTY EXEMPT MARITAL TRUST,

THE ROGER MCCARTY NON-EXEMPT MARITAL TRUST,

THE ROGER MCCARTY FAMILY TRUST,

THE ROGER MCCARTY EXEMPT FAMILY TRUST,

ROGER MCCARTY NON-EXEMPT FAMILY TRUST

MICHELE MCCARTY WOODS, Petitioner/Appellant/Cross-Appellee, v. JANE L. MCCARTY, Respondent/Appellee/Cross-Appellant.

No. 1 CA-CV 19-0056

ARIZONA COURT OF APPEALS DIVISION ONE

June 2, 2020

NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Appeal from the Superior Court in Maricopa County

No. PB2016-003876

The Honorable Carolyn K. Passamonte, Judge Pro Tempore, Retired

AFFIRMED IN PART; REVERSED AND REMANDED IN PART

COUNSEL

Snell & Wilmer, LLP, Phoenix

By John C. Vryhof, Kevin W. Wright

Counsel for Petitioner/Appellant/Cross-Appellee

Sherman & Howard LLC, Phoenix

By Matthew A. Hesketh, Sean M. Moore

Counsel for Respondent/Appellee/Cross-Appellant

MEMORANDUM DECISION

Judge Jennifer M. Perkins delivered the decision of the Court, in which Presiding Judge David D. Weinzweig and Judge James B. Morse Jr. joined.

PERKINS, Judge:

¶1 Michele McCarty Woods ("Michele") appeals the superior court's order granting summary judgment in favor of Jane McCarty as the trustee ("Trustee") and beneficiary of the Roger McCarty Trust ("Trust"), and the Trustee cross-appeals the court's denial of its motion to dismiss for lack of personal jurisdiction. We affirm the exercise of personal jurisdiction, but reverse the finding that Michele is not entitled to an accounting. We remand for the superior court to consider whether Michele established good cause for her entitlement to an accounting as an interested person and, if so, a determination of the sufficiency of the accounting previously provided.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Roger McCarty created the Roger McCarty Trust. The Roger McCarty Trust Declaration states, and the parties do not dispute, that it is a Texas trust to be governed by Texas law. See Trust, Art. XI. Michele is one of Roger's two surviving adult children. On Roger's death in 2011, the assets of the Roger McCarty Trust, after certain distributions to specific individuals, were distributed among three trusts: (1) the Roger McCarty Exempt Marital Trust, (2) the Roger McCarty Non-Exempt Marital Trust I, and (3) the Roger McCarty Non-Exempt Marital Trust II (collectively, "the Marital Trusts"). See Trust, Art. V.

¶3 Jane, Roger's widow, is the sole trustee of the Marital Trusts. See Trust, Art. II. During Jane's life, she is the sole income beneficiary of the Marital Trusts. See Trust, Art. V. On Jane's death, the Marital Trusts terminate and the assets of the Marital Trusts will be distributed to the Roger McCarty Non-Exempt Family Trust and the Roger McCarty Exempt Family Trust (collectively, the "Family Trusts"). See Trust, Art. V(C)(2). Michele is one of several Family Trust beneficiaries. See Trust, Art. VI.

¶4 The Trustee provided Michele with the Marital Trusts' tax returns, which include balance sheets listing the Trusts' assets, income, expenses, and distributions, for 2014 through 2016. In 2016, Michele petitioned in Maricopa County superior court for an accounting, alleging that despite her written request, the Trustee did not provide a proper accounting as required by Texas law. The Trustee moved to dismiss the petition, arguing that Arizona did not have personal jurisdiction over her because she was a Texas resident and the Marital Trusts are Texas trusts. The superior court denied the motion to dismiss. The parties then filed competing motions for summary judgment. After oral argument, the court found Michele was not entitled to an accounting because she was not a beneficiary of the Marital Trusts. The court granted judgment in favor of the Trustee, dismissed the petition for an accounting, and awarded $40,866.67 in attorneys' fees to the Trustee. After the court denied her motion to alter, amend, or vacate the judgment, Michele filed a timely notice of appeal. We have jurisdiction under A.R.S. section 12-2101(A)(1).

DISCUSSION

I. Personal Jurisdiction

¶5 The superior court exercised statutory personal jurisdiction after finding that Michele made a prima facie showing that Arizona is the principal place of administration for the Marital Trusts, which the Trustee failed to rebut. Arizona Tile, L.L.C. v. Berger, 223 Ariz. 491, 493, ¶ 8 (App. 2010). We review this ruling de novo. Hoag v. French, 238 Ariz. 118, 121, 122, ¶¶ 10, 17 (App. 2015). A prima facie case requires evidence sufficient to avoid a directed verdict. Bohreer v. Erie Ins. Exchange, 216 Ariz. 208, 211, ¶ 7 (App. 2007). A directed verdict should be granted only if the evidence, taken in a light most favorable to the non-moving party, "has so little probative value that reasonable people could not find for the claimant." Shoen v. Shoen, 191 Ariz. 64, 65 (App. 1997).

A. Statutory Jurisdiction

¶6 By statute, Arizona may exercise jurisdiction over trusts that have Arizona as their principal place of administration. A.R.S. § 14-10202(A). Michele argues that Arizona is the principal place of administration for the Marital Trusts. The Trustee argues that Roger McCarty, the trustor, intended Texas to be the principal place of administration because the Trust Declaration states that it is a Texas trust "to be governed, construed, and administered according to its laws, and shall continue to be so, although conducted or administered elsewhere within these United States." Trust, Art. XI. But the Trustee concedes that this is not a specific designation, and Michele contends the principal place of administration changed when Jane became trustee of the Marital Trusts because Jane lives in Arizona and hired an attorney and an accountant in Arizona to represent her as trustee.

¶7 Michele notes that the trial court considered whether the statutory elements of a principle place of administration found in A.R.S. § 14-10108(A) are present here. But that statute provides guidance to a court in deciding if "the terms of a trust designating the principal place of administration are valid and controlling[.]" A.R.S. § 14-10108(A). Neither party disputes the fact that the Marital trusts made no such designation.

¶8 The comments to the Uniform Trust Code ("U.T.C.") section upon which § 14-10202 is based state that "[a] trust's principal place of administration ordinarily will be the place where the trustee is located." U.T.C. § 108, cmt. (Unif. Law Comm'n 2000); see also May v. Ellis, 208 Ariz. 229, 232, ¶ 12 (2004) (When "'a statute is based on a uniform act, we assume that the legislature intended to adopt the construction placed on the act by its drafters,' and '[c]ommentary to such a uniform act is highly persuasive.'") (quoting UNUM Life Ins. Co. of Am. v. Craig, 200 Ariz. 327, 332, ¶ 25 (2001)). According to Jane's affidavits, she was a Texas resident until June 2016 (and thereafter a Nevada resident), was registered to vote in Texas, and had a Texas driver's license. While Jane concedes she is a winter visitor in Arizona and that she hired an Arizona attorney and accountant, she contends that her legal residence has never been Arizona; thus, Arizona is not the principal place of administration. A party may have only one domicile, and nothing in the record suggests that Arizona is Jane's domicile. See Ariz. Bd. of Regents v. Harper, 108 Ariz. 223, 228 (1972) (domicile requires physical presence and intent to remain permanently and a person may have only one domicile at a time).

¶9 Michele offered evidence to refute Jane's claim that she does not reside in Arizona. For example, Jane, as executor of Roger McCarty's estate, listed her Arizona address on the estate's 2013 tax return. Jane is listed as the sole member and manager of an Arizona LLC and she provided her Arizona address on the LLC's incorporation documents in 2015. However, these documents do not demonstrate that Jane intended to permanently change her residence and her affidavits state that, to the contrary, she intended to remain a Texas resident until she moved to Nevada in June 2016.

¶10 Michele contends that, as relevant to the question of where the trust is principally administered, the letter from the Trustee's Arizona attorney responding to Michele's request for additional information shows that the Arizona attorney administers the Marital Trusts on the Trustee's behalf. But the relevant inquiry is where the trustee is located. See U.T.C. § 108 cmt. If determining the principal place of administration is difficult, courts may consider where the trust records are kept or the assets held. Id. The trust records and books are kept in Texas and none of the assets are located in Arizona. We conclude the Marital Trusts were not principally administered in Arizona.

B. Specific Personal Jurisdiction

¶11 In the absence of statutory jurisdiction, A.R.S. § 14-10202(C) allows "other methods of obtaining jurisdiction over a trustee[.]" See also, Hoag, 238 Ariz. at 122, ¶ 17. "Arizona courts may exercise personal jurisdiction to the maximum extent allowed by the United States Constitution." Planning Grp. of Scottsdale, L.L.C. v. Lake Mathews Mineral Props., Ltd., 226 Ariz. 262, 265, ¶ 12 (2011); accord Ariz. R. Civ. P. 4.2(a).

¶12 Arizona courts may exercise specific personal jurisdiction over non-resident defendants when the party "has sufficient contacts with the state to make the exercise of jurisdiction 'reasonable and just' with respect to that claim." Planning Grp., 226 Ariz. at 265, ¶ 13 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 320 (1945)). Sufficient contacts by an out-of-state defendant occur when the aggregate of the defendant's contacts with this state demonstrate (1) purposeful conduct by the defendant targeting the forum, rather than accidental or casual contacts or those brought about by the plaintiff's unilateral acts, (2) a nexus between those...