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Volume XI, Number 175

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Co-Trustees Who Managed A Texas Trust With A Texas Beneficiary Had Sufficient Contacts With Texas To Be Subject To A Texas Court’s Personal Jurisdiction

In Alexander v. Marshall, the original trustee was the beneficiary’s mother and the wife of the beneficiary’s father, who was the settlor. No. 14-18-00425-CV, 2021 Tex. App. LEXIS 1952 (Tex. App.—Houston [14th Dist.] March 16, 2021, no pet. history). In December 2016, the original trustee appointed Louisiana residents as co-trustees of the trusts and signed appointment documents in Texas. The Louisiana co-trustees each signed acceptance documents in Louisiana. All of the co-trustees testified that they knew, at or around the time of their appointments, that the beneficiary was a Texas resident. The trust beneficiary sued the co-trustees for a declaratory judgment that the appointment of the co-trustees and their compensation scheme violated the terms of the trust instruments and that they aided and abetted the original trustee in breaches of duties. The Louisiana co-trustees objected to the Texas court’s personal jurisdiction over them and filed special appearances. The trial court overruled those objections, and they appealed.

The court of appeals affirmed the trial court’s order. The Louisiana co-trustees first argued that the trial court erred in overruling their objections regarding their personal capacities. The court of appeals disagreed, holding: “a person is always liable for their own torts in an individual capacity, and Preston has alleged that the co-trustees aided and abetted a tort—breach of fiduciary duty. The trial court did not err by not dismissing the co-trustees in their individual capacities.” Id.

The court of appeals next discussed the law regarding personal jurisdiction:

Texas’s exercise of personal jurisdiction over a nonresident defendant comports with due process if a nonresident defendant has “minimum contacts” with Texas and the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. A defendant’s minimum contacts with a forum, i.e., Texas, are established when the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. Id. Three principles govern this analysis: (1) only the defendant’s contacts with the forum are relevant, not the unilateral activity of another party or third person; (2) the defendant’s acts must be purposeful and not random, isolated, or fortuitous; and (3) the defendant must seek some benefit, advantage, or profit by availing itself of the jurisdiction such that it impliedly consents to suit there.

A nonresident defendant’s minimum contacts will give rise to specific personal jurisdiction if the plaintiff’s cause of action arises from or relates to those contacts. For a nonresident defendant’s contacts with Texas to support an exercise of specific jurisdiction, “there must be a substantial connection between those contacts and the operative facts of the litigation.” A nonresident’s “directing a tort at Texas from afar is insufficient to confer specific jurisdiction.” The proper focus is on the extent of the defendant’s activities in the forum, not the residence of the plaintiff.

However, the absence of physical contacts with Texas does not defeat personal jurisdiction so long as the defendant’s efforts are purposefully directed towards residents of Texas. A defendant who reaches out beyond one state and creates continuing relationships and obligations with a citizen of another state is subject to the jurisdiction of the latter state in suits based on those activities.

Id. The court held that the Louisiana co-trustees had sufficient contacts with Texas so that the Texas court’s exercise of jurisdiction over them was fair:

The co-trustees contend that this court should not follow Dugas because it is not binding and distinguishable based on the fact that the trusts in this case are governed by Louisiana law and require the trustees to submit issues regarding trust administration to a Louisiana court. But there are additional facts in this case that indicate the co-trustees purposefully availed themselves of the benefits of a Texas forum. While the trust in Dugas was settled in Florida and had administrative functions performed in Tennessee, here the trust was settled in Texas, has all of its property in Texas, and is run administratively in Texas. The former sole trustee, a Texan, appointed the co-trustees in Texas. Moreover, the co-trustees have received payments from Texas as a result of their appointments as co-trustees, and the appointments and future payments have an indefinite duration. These additional facts support a conclusion that the co-trustees have reached out beyond their state and created continuing relationships and obligations with citizens of another state… The co-trustees have not merely directed a tort at Texas, but they have reached out beyond Louisiana to create continuing relationships and obligations with citizens of Texas. Preston’s claim for breach of fiduciary duty arises out of those relationships and obligations… In sum, the trial court did not err by denying the special appearance. The co-trustees’ issues are overruled. The trial court’s order is affirmed.

Id.

© 2021 Winstead PC.National Law Review, Volume XI, Number 137
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About this Author

David Johnson Financial Institution lLtigation Winstead Law Firm Fort Worth Texas
Managing Shareholder - Fort Worth

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the Texas Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. 

David's financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class...

817.420.8223
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