A Strong Offense
A Stronger Defense
Where can a trustee be sued? The answer to that question may take into consideration a number of factors, including where the trustee is located, where the trust is administered, and the nature of the claims against the trustee. These were among the factors considered by the Court of Appeals of Kansas in dismissing trust litigation in Ashford v. Ann K. Fauvor Kansas Trust (2013 WL 6389519).
What seemingly important factor didn’t sway the Kansas appellate court into keeping the case?
The location of the trust assets.
The plaintiffs in this action sued a trust, its trustees, and its delegated agent. The claims asserted were for an accounting and appraisal of the trust; tracing and recovery of assets of the trust; removal of and redress by trustees; enjoinment of the trustees; and termination of the duties and powers that had been delegated by the trustees. The assets of this trust consisted of real property located in Kansas. Nevertheless, the district court dismissed the action for lack of jurisdiction. Because none of the parties resided in Kansas and all of the claims related to administration of the trust in Arkansas, the appellate court agreed that there was no personal jurisdiction over the defendants. Moreover, the appellate court noted that the trust document contemplated that the trust was to be administered in Arkansas pursuant to Arkansas law.
The appellate court was unpersuaded by the fact that the trust owned real property in Kansas and the trust received income from the Kansas property. The fact that the trust assets were located in Kansas was not a sufficient hook to exercise jurisdiction over out-of-state trustees because the claims asserted by the plaintiffs did not “arise out of the real property located in Kansas” but instead arose “from specific actions . . . in administering the trust in Arkansas.”
Kansas, therefore, apparently does not consider a foreign trustee that has accepted the trusteeship of a trust, the asset of which is real property situated in Kansas, to have subjected him, her or itself to jurisdiction in Kansas for all matters relating to that trust. Something more is needed specifically relating to the property. While it may seem that an accounting and an appraisal of the corpus relate to the property, the court found that they did not. The appellate court suggested that a claim related to a contract between the trust and a Kansas farmer might be heard in a Kansas court, but not purely trust administrative matters taking place out-of-state.
So, it appears Kansas – notably a Uniform Trust Code state – will not drag a foreign trustee into the courts of its state based solely on the res of a trust being physically located in the state. This approach may be at odds with the approach taken by other states.