Woods v. McCarty

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

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
FILED 6-2-2020

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.

P E R K I N S, 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.

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¶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

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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.

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¶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 contacts and the claim asserted, and (3) that exercise of jurisdiction
would be reasonable. Beverage v. Pullman & Comley, LLC, 232 Ariz. 414, 417,
¶ 9 (App. 2013) (citation omitted). This “inquiry focuses on the relationship
between the defendant, the forum, and the litigation.” Batton v. Tennessee
Farmers Mut. Ins. Co., 153 Ariz. 268, 271 (1987) (citation omitted).

¶13 Jane argues that Arizona lacks personal jurisdiction because
her actions in Arizona do not relate to her duties as trustee. The evidence
is to the contrary. The Trustee hired an Arizona accountant to prepare trust
tax returns from 2014 through 2016. Jane hired an Arizona attorney to
represent her and respond to Michele’s requests for information about the
Marital Trusts, the genesis of this very dispute. Jane initiated the
relationships with these Arizona professionals, knew their work would be
conducted here, presumably sent regular payments, and had other

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communications with them. Burger King Corp. v. Rudzewicz, 471 U.S. 462,
473 (1985) (“And with respect to interstate contractual obligations, we have
emphasized that parties who ‘reach out beyond one state and create
continuing relationships and obligations with citizens of another state’ are
subject to regulation and sanctions in the other State for the consequences
of their activities.”) (quoting Traveler’s Health Assn. v. Virginia, 339 U.S. 643,
647 (1950)).

¶14 The totality of Jane’s activity shows that her contacts with
Arizona are neither “random, fortuitous, or attenuated,” Batton, 153 Ariz.
at 271 (1987) (citations omitted), and that she could reasonably “expect to
be haled” into Arizona courts, Planning Grp., 226 Ariz. at 269, ¶ 29
(assessing jurisdiction contacts in totality, not in isolation). In addition to
her contractual relationships, she visits Arizona in the winter, maintains a
Paradise Valley address, and uses that address when conducting business,
including for a Trustee’s check to the IRS in February 2013. Walden v. Fiore, 571 U.S. 277, 285 (2014) (“relevant contact[s]” include physical presence
and continuing contractual relationships). Through such contacts, the
Trustee has “purposefully avail[ed] [herself] of the privilege of conducting
activities” within Arizona. Beverage, 232 Ariz. at 418, ¶ 18.

¶15 Moreover, the professional services that are at the heart of
this dispute occurred in Arizona, and the accounting services occurred on
an ongoing basis over time. Altogether, we conclude this evidence
establishes a prima facie case that the Trustee engaged in purposeful
conduct related to the Marital Trusts in Arizona. Cf. Beverage, 232 Ariz. at
419, ¶¶ 18–19 (holding that Arizona had personal jurisdiction over an out
of state law firm whose work for an Arizona client gave rise to the lawsuit).
The Trustee has sufficient purposeful contacts with Arizona to respond to
Michele’s petition for an accounting in an Arizona court.

¶16 The Trustee argues that it is not reasonable for Arizona to
exercise jurisdiction because no beneficiaries are in Arizona and the assets
in the Marital Trusts are in Texas. The focus of this litigation is whether
Michele may obtain an accounting and, if so, whether the financial
documents prepared in Arizona suffice. Planning Grp., 226 Ariz. at 271, ¶
41 (citing Burger King, 471 U.S. at 474). Presumably, the Arizona accountant
would be a primary witness as to trust financial documents and whether
they suffice as an accounting. Cf. Beverage, 232 Ariz. at 420, ¶ 27. The
Trustee has not presented a compelling case that litigating the case in
Arizona would be an unreasonable burden. See id. at ¶¶ 27–28. The
existence of other significant contacts with Texas does not render the
existence of personal jurisdiction in Arizona improper. “[P]ersonal

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jurisdiction is not a zero-sum game; a defendant may have the requisite
minimum contacts allowing the exercise of personal jurisdiction by the
courts of more than one state with respect to a particular claim.” Planning
Grp., 226 Ariz. at 268, ¶ 27. We affirm the exercise of personal jurisdiction
over the Trustee.

II. Michele is an Interested Person and May be Entitled to an
Accounting on a Showing of Good Cause.

¶17 Texas law provides that two groups may demand an
accounting from a trustee. First, the court may order an accounting to “all
beneficiaries on finding that the nature of the beneficiary’s interest in the
nature of the trust or the effect of the administration of the trust on the
beneficiary’s interest is sufficient to require an accounting[.]” Tex. Prop.
Code § 113.151(a). Second, the court may order a trustee to provide an
accounting to an “interested person on finding that the nature of the
interest in the trust of, the claim against the trust by, or the effect of the
administration of the trust on the interested person is sufficient to require
an accounting[.]” § 113.151(b).

¶18 Michele argues that, under Texas law, she is a “vested
remainder beneficiary” entitled to an accounting under Tex. Prop. Code §
113.151(a). The Trustee argues that Michele is not a beneficiary of the
Marital Trusts and will only receive a distribution from the Family Trusts
which do not yet exist, so Michele is not a beneficiary of the Marital Trusts
and is not entitled to an accounting. We need not decide if Michele is a
“beneficiary” under Tex. Prop. Code § 113.151(a) because we conclude that
she is an “interested person,” under Tex. Prop. Code § 113.151(b).

¶19 Texas law allows an interested party to demand an
accounting. Tex. Prop. Code § 113.151(b). The Trustee argues that Michele
waived this argument under Arizona Rule of Civil Procedure 7.1(a) by not
properly developing it in the superior court. We disagree. Michele pled
this alternative basis for her request in her motion for summary judgment
and reply, citing to two Texas statutes and with the facts supporting her
argument being largely coterminous with her purported basis as
beneficiary. See Ariz. R. Civ. P 7.1(a)(2) (requiring motions to be
accompanied by memoranda with “citations to . . . supporting authorities
and evidence”). Michele also raised this alternative argument in her post-
judgment motions. Although the argument was not as well-developed as
it is on appeal, it was sufficiently raised in the superior court.

¶20 The statutory definition of an “interested person” includes:

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any other person having an interest in or a claim against the
trust or any person who is affected by the administration of
the trust. Whether a person, excluding a trustee or named
beneficiary, is an interested person may vary from time to
time and must be determined according to the particular
purposes of and matter involved in any proceeding.

Tex. Prop. Code § 111.004(7); see also Tex. Prop. Code § 113.151(b). An
“interest” includes one that is “legal or equitable or both, present or future,
vested or contingent[.]” § 111.004(6). Thus, Michele need not be a
“beneficiary” to have standing to demand an accounting under Tex. Prop.
Code § 113.151(b).

¶21 Michele contends that she is affected by the administration
of the Marital Trusts because she becomes a beneficiary of the subsequent
Family Trusts that come into being upon Jane’s death and the termination
of the Marital Trusts. Michele is to receive specific assets that are now held
in the Marital Trusts. See Trust, Art. VI(B)(2)(a)(iii), (d), (e), (g), (h).
Whether Michele is a remainder beneficiary is not dispositive. Although a
remainder beneficiary is a “beneficiary” under Texas law, see Tex. Prop.
Code § 116.002, both a beneficiary and an interested person may be entitled
to an accounting. Tex. Prop. Code § 113.151. Thus, Michele need not show
that she is a remainder beneficiary to invoke her rights as an interested
person.

¶22 The Trustee further contends because Michele does not stand
to inherit from the Marital Trusts, she does not qualify as an interested
person. In support of this position, the Trustee cites Davis v. Davis, 734
S.W.2d 707 (Tex. App. 1987). In Davis, the appellant brought a claim for an
accounting and to remove the trustee of a family trust. Id. at 708. The trust
was created by the appellant’s mother for the benefit of the appellant’s
children. Id. The appellant’s ex-wife and a bank were named co-trustees.
Id. The appellant argued that he was an interested person as a residuary
beneficiary because if one of his children died intestate, he would inherit
that child’s interest in the trust. Id. at 709. The court rejected this, holding
that the possibility of an inheritance does not create a present interest in
the property. Id. Thus, the court found appellant was not an interested
person. Id. at 709–10.

¶23 Unlike the appellant in Davis, Michele has more than a
possible right to inherit the Marital Trust assets. Her right to inherit from
the Family Trust arises immediately upon Jane’s death and the termination

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of the Marital Trusts. For this reason, Michele’s interest is not as remote or
uncertain as that in Davis.

¶24 Whether a person qualifies as an interested person “must be
determined according to the particular purposes of and matter involved in
any proceeding.” Tex. Prop. Code § 111.004(7). Here, the initial Trust
Declaration created two successive trusts funded by the same principal
assets. The fact that the Marital Trusts must first terminate and then a
second set of Family Trusts must be formed does not negate Michele’s (and
those similarly situated) interest in ensuring the assets are properly
protected.

¶25 This is particularly true here because Jane is both the sole
trustee and the sole lifetime beneficiary of the Marital Trusts. The Trustee’s
interpretation means that only she can hold herself responsible for
properly managing the assets that Roger intended to pass on to his
children and grandchildren after Jane’s death, according to the terms in
the Trust Declaration. The Marital Trusts do not provide Jane with an
unrestricted right to invade the principal; the Trustee may distribute
principal as “necessary or advisable for [Jane’s] maintenance in health and
reasonable comfort.” Trust, Art. V(B)(1)(b) and (C)(1)(b). This limitation,
coupled with the extensive instructions for funding the subsequent Family
Trusts, show that the Trustor intended for the beneficiaries of the Family
Trusts to receive assets from Marital Trusts.

¶26 The Trustee contends it needs additional discovery to
determine whether Michele qualifies as an interested person. We disagree.
Michele’s interests are based on the terms of the Trust Declaration and
Texas law.

¶27 The Trustee also argues that Michele’s demand for an
accounting did not comply with Tex. Prop. Code § 113.151(a) because
Michele did not demand that the Trustee provide an accounting “to each
beneficiary.” Although Michele sought an accounting for herself, we do
not find this dispositive. This specific pleading requirement does not apply
to demands by interested persons, who may seek an accounting for only
themselves. See Tex. Prop. Code § 113.151(b). Additionally, the petition
could be amended to add a request on behalf of all beneficiaries.

¶28 But, Trustee’s counsel correctly pointed out at oral argument
that under Texas law, the terms of a trust prevail over default trust statutes
except in enumerated circumstances. Tex. Prop. Code § 111.0035(b). The
default statute provides that a court may order an accounting to an

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interested person, but the Trust Document provides that the Trustee may
only be required to produce an accounting to such an interested person on
a showing of good cause. Compare Tex. Prop. Code § 113.151(b), with Trust
Art. X(B). As the trial court did not address the issue, on remand, Michele
must demonstrate good cause pursuant to the trust document in order to
be entitled to an accounting.

III. Sufficiency of the Accounting

¶29 If Michele is entitled to an accounting, the Trustee offers an
alternative ground for summary judgment: that the documents voluntarily
provided to Michele were sufficient as an accounting under Texas law. But
the superior court did not reach this issue, and the exhibits in the record
on appeal are either partially redacted or so incomplete as to give little clue
as to whether Michele actually received the information required in an
accounting by Tex. Prop. Code § 113.152. We are not inclined to make this
fact-intensive evaluation in the first instance, let alone with the insufficient
information supplied by the record. We leave it to the court on remand to
determine if the Trustee is entitled to summary judgment on this ground
if necessary after its determination of whether good cause exists.

IV. Attorneys’ Fees

¶30 The superior court ordered Michele to pay a portion of the
Trustee’s attorneys’ fees under A.R.S. § 14-11004(B). In light of our
disposition, we instruct the superior court to reconsider the award of
attorneys’ fees on remand.

¶31 Both parties request an award of attorneys’ fees on appeal
under A.R.S. § 14-11004(B). The Trustee also cites Tex. Prop. Code § 114.064
in support of her request. Arizona law grants the court discretion to order
an opposing party to pay the other party’s fees. A.R.S. § 14-11004(B). In the
exercise of our discretion, we order each party shall bear her own
attorneys’ fees on appeal.

CONCLUSION

¶32 We affirm the superior court’s exercise of personal
jurisdiction over Jane as trustee. We reverse the orders finding Michele
was not entitled to an accounting and remand for the court to determine
whether Michele has demonstrated good cause for an accounting as an
interested person, and if so, whether the financial documents provided by
the Trustee complied with Texas law. The court shall also reconsider the

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award of attorneys’ fees on remand.

AMY M. WOOD • Clerk of the Court
FILED: AA

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