Foreign trustee can be sued in Virginia

RICHMOND, Va. — Where an out-of-state trustee engaged in sustained correspondence with Virginia-based trust beneficiaries, registered to conduct business in Virginia, has a registered agent in Virginia, and made distributions to the beneficiaries in Virginia, it was subject to personal jurisdiction in Virginia, a federal judge has ruled.

Here is  the ruling from U.S. District Judge Jamar K. Walker in Norfolk in Bascom v. Fiduciary Trust Company International:

Background

The plaintiff, Ellen Bascom, married John Porter, on June 3, 2010. On Dec. 12, 2014, John Porter’s parents each executed a trust agreement. The trusts provided that, upon the deaths of the settlors, payments would be made by the trusts to the settlors’ living children, including John Porter.

The trusts also provided that, upon the death of John Porter, $500,000 from each trust would be set aside in a separate trust for the plaintiff. The trusts would then each make yearly distributions of $50,000 to the plaintiff for a period of 10 years, for a total of $1,000,000. The funding of the trusts for the plaintiff’s benefit is contingent upon the plaintiff having been “married to and living with” John Porter at the time of his death.

Sometime in or after 2020, “their relationship deteriorated.” They did not divorce. John Porter was hospitalized on May 3, 2022, and died on June 24, 2022. In this suit, Bascom has sued Fiduciary Trust Company International, or FTCI, trustee of the trusts. FTCI argues that the court lacks personal jurisdiction over it and that the complaint fails to state a claim.

Jurisdiction

FTCI argues that the court lacks personal jurisdiction. The court disagrees. FTCI has sufficient contacts with the Commonwealth of Virginia to establish a prima facie case of personal jurisdiction. FTCI is registered to do business in the Commonwealth of Virginia and has a registered agent in Suffolk, Virginia. FTCI has corresponded regularly with the plaintiff and John Porter in Virginia by mail, email and telephone regarding the trusts. FTCI has made distribution payments under the trusts to John Porter (including into an account shared by the plaintiff) in Virginia. When one of the settlors, Joan Porter, died, FTCI had her home in Chesapeake, Virginia appraised and retained a broker to sell the home.

In addition, FTCI “deliberately engaged in significant or long-term business activities” in Virginia by undertaking the duties of trustee for two trusts that, from their inception, identified at least two beneficiaries — the plaintiff and John Porter — who were Virginia residents. Where part-time Virginia residents created trusts to benefit Virginia residents, it was eminently foreseeable that the trustee of those trusts might be “haled into a Virginia court.” Other courts have come to the same conclusion on similar facts.

To be sure, the fact of a beneficiary’s residence in the forum state, standing alone, does not constitute purposeful availment. But here, it is FTCI’s cumulative contacts with the Commonwealth of Virginia — including its sustained correspondence with the plaintiff and her husband, its registration to conduct business in Virginia, its appointment of an agent in Virginia, the settlors’ part-time residence in Virginia and the beneficiaries’ residence in Virginia — that have established a prima facie showing of purposeful availment and, thus, personal jurisdiction.

Merits

If the plaintiff was “living with” her husband at the time of his death, then she can take under the trusts; if she was not, then she cannot. The plaintiff argues whether she was “living with” her husband at the time of his death is a factual question for a jury.

The court finds that the term “living with,” as used in the trusts at issue here, is ambiguous. The trusts do not define the term, and the boundary between what may constitute “living with” and what may not is unclear. As a result, the court cannot resolve the parties’ dispute over this term on a motion brought under Rule 12(b)(6).

Deference

Finally, FTCI argues that the court must afford deference to FTCI’s interpretation of the trusts unless the court finds that FTCI has acted in bad faith. The court rejects FTCI’s argument. The cases cited by FTCI make clear that courts must only defer to exercises of a trustee’s discretion.

Here, the provision of the trusts cited by FTCI does not confer the discretion to decide whether, and to whom, the trusts will distribute. In any event, the provision cited by FTCI cannot override the plain, mandatory language of the specific provisions relating to the plaintiff. These provisions leave no room for discretion.

Defendant’s motion to dismiss denied.