771 F.2d 874 (5th Cir. 1985), 84-2043, duPont v. Southern Nat. Bank of Houston, Tex.

Docket Nº:84-2043.
Citation:771 F.2d 874
Party Name:Eugene duPONT, III, Plaintiff-Appellee Cross Appellant, v. SOUTHERN NATIONAL BANK OF HOUSTON, TEXAS, Trustee, et al., Defendants-Appellants Cross Appellees.
Case Date:September 23, 1985
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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771 F.2d 874 (5th Cir. 1985)

Eugene duPONT, III, Plaintiff-Appellee Cross Appellant,



Defendants-Appellants Cross Appellees.

No. 84-2043.

United States Court of Appeals, Fifth Circuit

September 23, 1985

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Frank B. Davis, Scott A. Brister, Houston, Tex., for Southern Nat. bank.

Ronald A. Palmer, Gregg S. Weinberg, Houston, Tex., for Eugene duPont, IV.

Robert A. Gwinn, Charles L. Perry, Dallas, Tex., for Edward J. Brady, Trustee.

John T. Anderson, Duncan Elliott Osborne, Austin, Tex., for Daphne B. Vaughan and B.F. Vaughan.

J. Clifford Gunter, III, Michael Kuhn, Houston, Tex., for Eugene duPont, III.

Appeals from the United States District Court for the Southern District of Texas.

Before CLARK, Chief Judge, GOLDBERG and TATE, Circuit Judges.

GOLDBERG, Circuit Judge:

This case illustrates once again the unfortunate verity that the family, although ideally a nurturer of love and affection, often succumbs to the corrosive influence of avarice and financial calculation. We chronicle today an attempt at economic filicide involving one of America's most renowned and wealthy families--the duPonts. The partriarch of the family, Eugene duPont III, seeks through this suit to revoke an irrevocable Trust whose principal beneficiary is his son, Eugene duPont IV. According to the findings of the court below, duPont III established the Trust largely to prevent his then-wife, Joanne A. duPont, from obtaining his property in the event of a divorce. Having since divorced Joanne duPont and remarried, duPont III now wishes to return the Trust property to his own control.

The district court, after hearing duPont III's evidence, orally granted the Trustees' Rule 41(b) motion to dismiss for failure to show a right to relief. Fed.R.Civ.P. 41(b). When it entered its Findings of Fact and Conclusions of Law, however, the district court found that two disputed properties had been ineffectively transferred to the Trust and therefore still belonged to duPont III. In reaching this conclusion, the district court, without hearing the Trustees' evidence, granted duPont III a substantial portion of his claim.

The issues before us on appeal, like the family squabble underlying them, are messy. On the one hand, the Trustees and duPont IV argue that they were denied their right to litigate the ownership of the disputed properties. They contend, in addition, (1) that duPont III is judicially and equitably estopped from arguing that the property transfers were ineffective, (2) that the property transfers were valid as a matter of law, and (3) that the district court erred in denying ad litem fees and taxing costs to duPont IV. 1 DuPont III meanwhile cross-appeals from the district court's decision (1) that the Trust is valid, (2) that the Trustees should not be removed on the ground of hostility, and (3) that the litigation expenses of the Trustees were properly chargeable to the Trust, and, in particular, to Trust income rather than principal.

We conclude that the district court erred in invalidating the property transfers without allowing the appellants an opportunity to present their evidence, and therefore vacate and remand this portion of the district court's opinion. We also remand to the district court the issue of duPont IV's ad litem fees. In all other respects, we affirm the decision of the district court.


In December 1972, Eugene duPont III, one of the heirs to the duPont de Nemours fortune, established an irrevocable Trust for the benefit of himself, his then-wife, Joanne duPont, and his only son, duPont IV. The Trust provided for discretionary distributions of income by the Trustees to duPont III during his lifetime, and discretionary distributions of income and principal

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after his death to duPont IV, duPont IV's issue, and Joanne duPont if she was still married to duPont III at his death. The Trust instrument appointed Southern National Bank of Houston ("the Bank") and Edward J. Brady as Trustees; John H. Gardner was also later appointed as Trustee when he resigned from his position at the Bank. By its terms, the Trust was to be governed by Texas law. Through the time of trial, the Trustees had made discretionary payments of the entire net income of the Trust to duPont III.

The assets of the Trust initially consisted of stock in General Motors Corporation and E.I. duPont de Nemours Corporation. In 1973, duPont III attempted to transfer two additional assets to the Trust: (1) the Nemours Plantation in South Carolina, and (2) the Harridge House in New York City. These properties allegedly have a value of approximately $22 million, more than two-thirds the total value of the Trust. The transfer of Nemours Plantation was accomplished by means of the execution and delivery of three deeds naming the Trustees as grantees; that of Harridge House by means of a written assignment of duPont III's partnership interest in the property. DuPont III now claims that these transfers were defective and that they were not formalized by the Trustees until 1979, by which time duPont III had changed his mind about the transfers.

In October 1978, duPont III and his wife were divorced and duPont III remarried shortly thereafter. During the divorce proceedings, duPont III allegedly claimed that the Nemours and Harridge House properties belonged to the Trust and therefore could not be part of the divorce settlement. Excluding these properties, duPont III's personal liabilities exceeded his assets and, accordingly, the divorce settlement was (relatively speaking) quite small. Joanne duPont received $70,000 in alimony and $10,000 in child-support per year, as compared to duPont III's average Trust income of $1.1 million.

Following the divorce and remarriage, duPont III brought suit against the Trustees and various income and contingent beneficiaries and remaindermen of the Trust, including duPont IV, seeking to rescind or reform the Trust. According to duPont III, the Trust was established to achieve certain tax benefits--in particular, to allow him to provide for duPont IV's inheritance without paying gift or estate taxes--which will not in fact be realized. DuPont III argued that the Trust should therefore be rescinded or reformed because it was based on a mistake and its purpose had been frustrated. Alternatively, duPont III argued that the transfers of Nemours Plantation and Harridge House to the Trust were invalid. He also sought to remove the Trustees on the ground of hostility, and disputed certain payments by the Trustees of trustee fees and litigation expenses. The Trustees and duPont IV counterclaimed for a declaratory judgment that the transfers of property to the Trust by duPont III were valid and that the Trust's title to these properties was free of any cloud.

A trial before the district court commenced on November 29, 1982. At the close of duPont III's case in chief, the defendants moved to dismiss the suit pursuant to Fed.R.Civ.P. 41(b) on the grounds that duPont III had failed to establish that the Trust was invalid and that he was estopped from disputing the validity of the property transfers. The district court orally granted the defendants' motion and adjourned the trial. In its oral ruling, the district court stated that the Trust should be enforced since there was no mistake or frustration of purpose; it did not explicitly refer to that part of the defendants' motion concerning the validity of the Nemours and Harridge House property transfers.

On September 27, 1983, ten months after the trial was adjourned, the district court issued its memorandum opinion. DuPont v. Southern National Bank, 575 F.Supp. 849 (S.D.Tex.1983). The court held in favor of the Trustees concerning the validity of the Trust. However, it also held that title to Nemours Plantation and Harridge House had not been effectively transferred

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to the Trust and that these properties therefore still belonged to duPont III.

After the district court denied the defendants' post-judgment motions, the defendants brought the present appeal and duPont III cross-appealed.



Rule 41(b) of the Federal Rules of Civil Procedure provides:

After the plaintiff, in an action tried by the court without a jury, has completed the presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. The court as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render any judgment until the close of all the evidence.

A dismissal under Rule 41(b) differs from a directed verdict in a jury trial in that the court need not determine that the defendant is entitled to judgment as a matter of law. 5 J. Moore, J. Lucas & J. Wicker, Moore's Federal Practice p 41.13(4) at 41-177 to 41-179 (2d ed. 1985). Instead, as the finder of fact, the court may resolve disputed issues of fact. A Rule 41(b) dismissal is warranted when the district court, even before hearing the defendant's evidence, determines that the plaintiff has failed to offer persuasive evidence regarding the necessary elements of his case.

In the present case, the Trustees and duPont IV made a Rule 41(b) motion at the close of duPont III's evidence. This motion explicitly covered all aspects of duPont III's claim, including the validity of the Trust, the effectiveness of the transfers of property to the Trust, the removal of the Trustees, and the payment of litigation expenses by the Trustees....

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