Stevens v. Loomis

• Citation: 223 F. Supp. 534
• Decision Date: 07 November 1963
• Docket Number: Civ. A. No. 63-544-W.
• Parties: Helen McLanahan STEVENS v. Chauncey C. LOOMIS and First Agricultural National Bank of Berkshire County.
• Court: U.S. District Court — District of Massachusetts

223 F. Supp. 534

Helen McLanahan STEVENS v. Chauncey C. LOOMIS and First Agricultural National Bank of Berkshire County.

Civ. A. No. 63-544-W.

United States District Court D. Massachusetts.

November 7, 1963.

Jacob M. Atwood, Boston, Mass., for plaintiff.

Wilmot R. Hastings, and Robert J. Hallisey, Bingham, Dana & Gould, Boston, Mass., for defendant.

WYZANSKI, District Judge.

This case is now before the Court on defendants' motion to dismiss. Among the six grounds asserted are failure to join an indispensable party, Elizabeth McLanahan Loomis (hereinafter called Elizabeth), and failure to state a claim upon which relief can be granted.

Helen McLanahan Stevens (hereinafter called Helen) is a citizen of New York; her sister Elizabeth is a citizen of Massachusetts; Elizabeth's husband, Chauncey C. Loomis (hereinafter called Loomis), is a citizen of Massachusetts; and First Agricultural National Bank of Berkshire County is a national corporation, located in Massachusetts.

Helen and Elizabeth are daughters of the late Ella McLanahan (hereinafter called Ella), who died in 1942, apparently as a citizen and resident of Pennsylvania. She named Loomis and the Bank executors and trustees under her will. The Orphans' Court of Blair County, Pennsylvania granted probate of Ella's will, issued to Loomis and the Bank letters testamentary as executors, and, after their final accounting, discharged them on September 3, 1946. However, Loomis and the Bank are still serving as trustees. Whether they are testamentary trustees or inter vivos trustees, they seem to have been discharged from any duty to report to Pennsylvania Court, and are acting on the theory that they are administering a Massachusetts trust.

Helen filed a complaint against Loomis and the Bank. Elizabeth is not named as a party plaintiff or defendant. The complaint alleges that more than two decades ago Loomis injured Ella by breaches of his fiduciary duty to her. The locus of those breaches and the then citizenship and residence of Ella and Loomis are not specified. The pleading next alleges that Loomis and the Bank wrongfully and knowingly failed to pursue Ella's cause of action against Loomis individually, even after plaintiff on March 8, 1963 made demand on them, and that each of the two sisters, Helen and Elizabeth, "is a co-beneficiary of Ella's estate and trust" (Par. 22). Plaintiff prays that Loomis shall account to Ella's estate or the plaintiff for his profits and pay damages, and that the Bank shall pay damages "to Ella's estate and/or plaintiff."

Defendants' motion is founded upon Federal Rules of Civil Procedure, rule 19(a) which provides:

"Necessary Joinder. Subject to the provisions of Rule 23 and of subdivision (b) of this rule, persons having a joint interest shall be made parties and be joined on the same side as plaintiffs or defendants. When a person who should join as a plaintiff refuses to do so, he may be made a defendant or, in proper cases, an involuntary plaintiff."

Defendants' argument is that the absent Elizabeth and the absent remaindermen under Ella's will (to whom the briefs but not the pleadings refer) are indispensable parties inasmuch as they are "persons having a joint interest" with Helen, the plaintiff; and that the complaint should be dismissed because, although their joinder is necessary under Rule 19(a), if they were to be joined there would be lacking diversity of citizenship between the parties and hence this Court would lack jurisdiction. This argument is entitled to prevail for the following reasons.

(1) This is a diversity action, under 28 U.S.C. § 1332. No other basis of federal jurisdiction has been suggested or is apparent.

(2) There has been much confusion in the cases as to whether in a diversity action federal or state rules determine indispensable parties whose joinder is necessary under Rule 19(a). Federal rules have been favored in, for example, Resnik v. La Paz Guest Ranch, 9th Cir., 289 F.2d 814; Cowling v. Deep Vein Coal Co., 7th Cir., 183 F.2d 652. State rules have been relied upon in Kroese v. General Steel Castings Corp., 3d Cir., 179 F.2d 760, and Dunham v. Robertson, 10th Cir., 198 F.2d 316. See Note, Indispensable Parties in the Federal Courts, 65 Harv.L.Rev. 1050, 1052.

Wright, Federal Courts (1963) p. 260 soundly observes: "The conflict is more apparent than real. A correct resolution is that state law determines the nature of the interest which a party has in a controversy, while the rules, and federal decisions construing them, control in determining whether a particular interest, found to exist under state law, should cause the party to be classified as indispensable, necessary or proper. Thus state decisions as to the nature of the interest are controlling, but state classifications as to the label to be applied to the party should not be." Hertz v. Record Publishing Company of Erie, 3d Cir., 219 F.2d 397, 399-400; Gas Service Co. v. Hunt, 10th Cir., 183 F.2d 417, 419; Braniff Airways, Inc. v. Falkingham, D. Minn., 20 F.R.D. 141; Baker v. Dale, W. D.Mo., 123 F.Supp. 364; and cases cited 2 Barron & Holtzoff, Federal Practice and Procedure, (Wright ed., 1960) § 511 n. 16.1.

Ex majore cautela, it should be noted that Professor Wright's fruitful proposal may not sufficiently emphasize the point that if, as a matter of substantive law, a state does not recognize that a plaintiff has a particular right of action unless he joins with him certain others, then, under Erie R. R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, the federal diversity court is precluded from giving a plaintiff who fails to join those others an opportunity to proceed as though alone he had a substantive right. Cf. Angel v. Bullington, 330 U.S. 183, 67 S.Ct. 657, 91 L.Ed. 832, Baker v. Dale, W.D.Mo., 123 F.Supp. 364, 367. See Note, Developments in the Law Multi-party Litigation in the Federal Courts, 71 Harv.L.Rev. 874, 889. But see 3 Moore, Federal Practice (2d ed., 1948) par. 19.07, p. 2153, n. 11. To permit the federal diversity court to be used when the state court would exclude on substantive grounds a claim would be tantamount to creating a new federal substantive right without any constitutional or statutory warrant.

(3) In this diversity action the federal district court must turn to the law of Massachusetts, including its rules of conflict of laws, in order to determine the substantive rights of plaintiff or, as Professor Wright calls it, "the nature of the interest" which plaintiff has. Plaintiff's complaint, however, is so drawn as to make it difficult to know the precise technical rights and interest on which plaintiff relies.

(a) If plaintiff contends that, as a legatee under Ella's will, or as a beneficiary under Ella's testamentary trust, she can bring a direct action against Loomis for wrongs he caused Ella, plaintiff's contention is frivolous and without any support under the law of Pennsylvania where Ella's will was probated and her estate administered, or under the law of Massachusetts, where Loomis resides, or under any other law known to this Court. Hence, this branch of the complaint fails to state a cause of action. The appropriate procedure for a legatee or beneficiary of a testamentary trust who discovers, after the executors have rendered their final account and been discharged, that the estate has a neglected claim against a third person is to apply to some probate court, presumably in the state where the third person resides or possibly in the state where the testatrix's will was originally probated, for appointment of an administrator de bonis non, or a special administrator, or an ancillary administrator, so that the administrator may pursue the third person and bring into the estate the proceeds of the claim.

(b) If plaintiff contends that as a legatee or as a beneficiary she has a cause of action against defendants as Pennsylvania executors for breach of their duty, the law of Pennsylvania applies. But it is clear that under that or any other law this branch of the complaint fails to state a cause of action, inasmuch as defendants, having rendered their final account, have been discharged by the Orphans' Court and are no longer executors. If the estate has against them personally because of their conduct as executors a valid claim which is not foreclosed by the discharge decree of the Orphans' Court then the appropriate procedure is the one described in the preceding paragraph.

(c) If plaintiff contends that as a beneficiary under a testamentary trust she has a cause of action against the trustees for their failure to petition the Pennsylvania Orphans' Court or the Massachusetts Probate Court for the appointment of an administrator de bonis non for the purpose of prosecuting Ella's claim against Loomis, then Massachusetts substantive law applies to the claimed cause of action. Massachusetts courts would apply Massachusetts substantive law because the claimed cause of action seeks to call to account Massachusetts trustees for an alleged breach of their duty under a trust now being administered in this Commonwealth. Such control of the trust as Pennsylvania may have had was minimal and did not exist during most of the period when it is alleged they negligently failed to take appropriate steps to bring Loomis to account.

The claimed cause of action just referred to in paragraph (c) above is admittedly not very artistically set forth in the complaint. Quite erroneously, the complaint advances the theory that defendants as trustees could have sued Loomis personally, and were chargeable with a breach of duty for not having done so. That theory is untenable, and, as stated in paragraph (a) above, frivolous inasmuch as the trustees had no power directly to sue Loomis personally for any wrong he inflicted on Ella. But the trustees could have petitioned a probate court for the appointment of an administrator to sue Loomis. Nor is it necessarily a fair reply to tell the...