De Korwin v. First National Bank of Chicago
| Decision Date | 10 June 1959 |
| Docket Number | No. 12314-12316,12395.,12314-12316 |
| Parties | Margaret DE KORWIN, etc., Plaintiff, v. FIRST NATIONAL BANK OF CHICAGO, etc., et al., Defendants. FIRST NATIONAL BANK OF CHICAGO, as Trustee under the Will of Otto Young, Deceased, Petitioner-Appellee, v. Graveraet Young KAUFMAN, Respondent-Appellee, and Karl C. Jacobs et al., Respondents (Appellants in No. 12314) and Dr. Louis Ruttenberg et al., Respondents (Appellants in No. 12315) and Robert S. Berson et al., Respondents (Appellants in No. 12316). Margaret DE KORWIN etc., Plaintiff-Appellee (No. 12395) v. FIRST NATIONAL BANK OF CHICAGO, etc., et al., Defendants-Appellees (No. 12395). Appeal of Oscar BENNES et al. (Appellants in No. 12395). |
| Court | U.S. Court of Appeals — Seventh Circuit |
Hamilton Smith, Louis L. Kahn, Jack A. Diamond, Daniel M. Schuyler, Jay Stough, Joseph R. Julin, Thomas Hart Fisher, Norman Crawford, Chicago, Ill., for appellants.
Bartlett S. Marimon, William B. McIlvaine, A. Leslie Hodson, Chicago, Ill. (Robert H. Bork, Frederick W. Temple, Howard G. Krane, Clarence E. Fox, George W. Thompson, Kirkland, Ellis, Hodson, Chaffetz & Masters, Chicago, Ill., Wilson & McIlvaine, Chicago, Ill., of counsel), Charles R. Aiken, Richard F. Watt, Chicago, Ill. (Cotton, Fruchtman & Watt, Chicago, Ill., of counsel), Frank E. McDonald, A. Bradley Eben, Harold A. Smith, Chicago, Ill. (Winston, Strawn, Smith & Patterson, Chicago, Ill., of counsel), Jack I. Levy, Chicago, Ill. (Sonnenschein, Lautmann, Levinson, Rieser, Carlin & Nath, Chicago, Ill., of counsel), for appellees.
Before DUFFY, Chief Judge, and PARKINSON and KNOCH, Circuit Judges.
These four appeals have been consolidated in this opinion inasmuch as they emanate from the same proceeding below and, to some extent, do or may affect the interests of all parties. No. 12314 challenges the validity and seeks reversal of a protective order entered on February 20, 1958 pursuant to Rule 30(b) of the Federal Rules of Civil Procedure, 28 U.S. C.A. The appellants in No. 12315 have adopted the brief of appellants in No. 12314 and have also adopted the brief of appellants in No. 12316, in which the jurisdiction of the District Court is assailed, and which jurisdictional challenge is carried through in No. 12395, wherein a decree of May 22, 1958 is also placed under attack.
This proceeding has been pending in the District Court since 1943 when a complaint was filed to construe the will of Otto Young, deceased, and praying, inter alia, for an accounting and distribution by the trustee. It has been here on appeal involving other issues on three prior occasions, sub nom. DeKorwin v. First National Bank of Chicago, 7 Cir., 1946, 156 F.2d 858; 7 Cir., 1950, 179 F.2d 347; 7 Cir., 1956, 235 F.2d 156.
Graveraet Y. Kaufman, Jane Kaufman Harding, Juliet Graveraet Kaufman de Manio and Marie Louise Brill, four grandchildren of Otto Young, each became vested with an 1/18 share in the remainder of the trust estate administered by the petitioner, First National Bank of Chicago, as trustee under the will of Otto Young, deceased, and also with an 1/18 share, respectively, of the liquidation trust estate, under the conveyance and liquidation trust agreement of November 14, 1951.
The District Court entered a decree on December 14, 1951 pursuant to and approving a family settlement agreement and the conveyance and liquidation trust agreement of November 14, 1951 wherein its jurisdiction was continued and expressly reserved to administer the trust and, inter alia, "to supervise and direct the distribution of the income and principal of the testamentary trust estate of Otto Young, deceased, * * *."
The trust is a large one, a great portion of which consisted of real estate and lease holds which had to be managed and liquidated. Acting under the orders of the District Court herein this was done and liquidation has been completed.
After the death of the last life tenant on August 17, 1956 distribution was in order. However, prior thereto the four beneficiaries named above made various partial assignments of their respective shares in the trust estate.
On September 14, 1956 the District Court ordered the trustee to create segregated share accounts into which the shares of the four assigning grandchildren were to be made and held subject to the further order and direction of the Court. Subsequently, on October 29, 1956, the District Court ordered the trustee to file a petition listing the names of the persons claiming by way of assignment and to cause all of them to be made parties defendant thereto and, on or before June 18, 1957, to appear or plead to the trustee's petition for instructions as to the distribution of the remaining shares. The assignees live in some seven states. None of them lives in Illinois and the majority of them reside in New York.
On February 20, 1958 the District Court entered an order pursuant to Rule 30(b), Federal Rules of Civil Procedure, 28 U.S.C.A., directing the First National Bank of Chicago, as trustee of the testamentary trust estate of Otto Young, deceased, to pay to Graveraet Y. Kaufman, one of the assigning grandchildren, from funds that are here claimed by the assignees, $14,500 immediately and $1,250 monthly thereafter for his support.
On May 22, 1958 the District Court entered a decree confirming a Master's Report, dated May 7, 1958, approving the account and actions of the testamentary trustee during the period from May 26, 1916 to August 17, 1956. It approved certain sums allowed as costs of administration for fees and expenses of the trustees and their attorneys. The Court also retained jurisdiction of the segregated shares aforementioned "for the sole purpose of determining the claims and controversies between Graveraet, Juliet, Marie and Jane and the parties claiming by, through or under them as to the ownership of the segregated shares."
The three questions that are now presented to this Court are:
As a matter of convenience we will treat all three questions as if raised by all appellants without further distinction for to do otherwise would serve no purpose other than to create needless confusion.
In the matter of the District Court's jurisdiction appellants concede "that any in rem claims against property that actually is in custodia legis must be presented to the court which has the property in custody" and "recognize that it is no longer necessary for property to be in the physical possession of an officer of the Court, such as a receiver or a Clerk of the Court, in order to be in effect in custodia legis." However, they contend that an action between a trust beneficiary and the persons to whom he has assigned part or all of his interest therein is an action in personam and hence where the assignors are non-residents they can not be compelled to litigate their claims as part of the subject matter of a suit in a federal court against a trustee to construe a trust instrument, take an accounting and make distribution, absent any other basis of federal jurisdiction.
Appellees on the other hand claim that this action is in rem or quasi in rem and, therefore, where the District Court has jurisdiction over the res it necessarily follows that that Court has power to determine all claims to the res.
We agree with the appellees. When the District Court entered its decree of December 14, 1951 it took over the supervision and direction of the administration, liquidation and distribution of the trust estate.
By decree entered February 4, 1955 the District Court construed the will as empowering the trustee to sell certain specific property and on July 20, 1955 the sale of the property was approved and confirmed.
On October 13, 1955 the District Court enjoined one of the beneficiaries from further prosecution of a state court partition proceeding involving the trust property. DeKorwin v. First National Bank of Chicago, D.C.N.D.Ill., 1955, 136 F.Supp. 720. The Court there said in its reported opinion at page 723:
"As has been seen, the trust res long since was drawn into the custody of this court * * *".
We dismissed the appeal, DeKorwin v. First National Bank of Chicago, 7 Cir., 1956, 235 F.2d 156, and stated at page 157:
"Judge Igoe has supplied a chronicle of the salient events and reached conclusions which we consider unassailable."
Only the most jaundiced reading of both opinions would allow one to believe that this Court was not referring to the District Court's conclusion that the res was within its exclusive custody.
It appearing from the record that the District Court has for many years exercised complete and exclusive dominion over this trust property certainly it would be inconceivable to hold that the res is not held by the District Court in custodia legis.
Thus it necessarily follows that the District Court acquired jurisdiction in rem or quasi in rem. It must and does control the trust estate and, therefore, has jurisdiction to adjudicate all claims to the res to the exclusion of any court of co-ordinate jurisdiction in order that distribution can be made to the parties lawfully entitled thereto and the trust terminated. Farmers' Loan & Trust Co. of New York v. Lake St. Elevated Rd. Co., 1900, 177 U.S. 51, 61, 20 S. Ct. 564, 44 L.Ed. 667; Central Union Trust Co. of New York v. Anderson County, 1925, 268 U.S. 93, 96, 45 S.Ct. 427, 69 L.Ed. 862; Princess Lida of Thurn and Taxis v. Thompson, 1939, 305 U.S. 456, 466, 59 S.Ct. 275, 83 L.Ed. 285; Natural Gas Pipeline Co. v. Federal Power Commission, 7 Cir., 1942, 128 F.2d 481,...
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