Judgments of the courts of the state where entrusted land is sited are binding on the courts of the other states with respect to the land. See 7 Scott & Ascher §46.2.3.1. A judgment of a court of a state other than the state where a parcel of real estate is located cannot “directly” affect interests in the land, although it may indirectly do so if it has personal jurisdiction over the claimants, such as by “imposing personal obligations on the parties over whom it has jurisdiction, enforceable by suit in the state of the situs…[of the land]…, or by application at the situs of the doctrine of res judicata or the doctrine of collateral estoppel.” 7 Scott & Ascher §46.2.3.2.
For an example of what “imposing personal obligations” in a multijurisdictional setting looks like in practice in the trust context, see Hirchert Family Trust v. Hirchert, 65 So.3d 548 (Fla. 2011). A parcel of California real estate is the subject of an inter vivos trust administered in California. In violation of the terms of the trust the trustee conveys the real estate to himself in his individual capacity. He then sells the parcel and purchases with the proceeds another California parcel, legal title to which he takes free of trust jointly with his wife. He dies. She then sells that parcel and with the proceeds purchases a parcel of real estate in Florida. Having traced the proceeds from the sale of the California real estate (that has been wrongfully taken out of the California trust) ultimately into the Florida real estate, a California court declares the wife to be a constructive trustee of the Florida real estate and issues an equitable specific-performance order against her personally to deed legal title to the Florida real estate to a receiver charged with selling the Florida real estate and remitting the proceeds to the successor trustee of the California trust. The California court has personal jurisdiction over the wife, who is not, with respect to the properties at issue, a BFP. A Florida court enforces the equitable specific-performance order of the California court. The California court’s efforts to take matters into its own hands and itself execute the deed, however, are to no avail, the California court lacking in rem jurisdiction over the Florida real estate. In other words, the Florida court declines to give full faith and credit to the California court’s efforts to convey legal title to the Florida real estate via a deed of its own making. Thanks to equity, however, there is more than one way to skin the full-faith-and-credit cat.
The procedural equitable remedy of tracing or following property into its product, is taken up generally in §7.2.3.1.3 of Loring and Rounds: A Trustee’s Handbook (2022), which section is reproduced in the appendix immediately below. The Handbook’s 2022 Edition is available at https://law-store.wolterskluwer.com/s/product/loring-rounds-a-trustees-handbook-2022e-misb/01t4R00000OVWE4QAP.
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