Akrotirianakis v. Burroughs

• Decision Date: 10 January 1967
• Docket Number: Civ. No. 17762.
• Citation: 262 F. Supp. 918
• Parties: Kostas AKROTIRIANAKIS, also known as Costas Akros, individually and as attorney-in-fact for the residuary heirs of George Perry, deceased v. George T. BURROUGHS, Emanuel Tsourounis, Maryland National Bank, Hoke Coin Machine Service, Inc., Leon Halkos.
• Court: U.S. District Court — District of Maryland

262 F. Supp. 918

Kostas AKROTIRIANAKIS, also known as Costas Akros, individually and as attorney-in-fact for the residuary heirs of George Perry, deceased v. George T. BURROUGHS, Emanuel Tsourounis, Maryland National Bank, Hoke Coin Machine Service, Inc., Leon Halkos.

Civ. No. 17762.

United States District Court D. Maryland.

January 10, 1967.

John L. Kilcullen and McNutt, Dudley & Easterwood, Washington, D. C., and William B. Kempton and Barton, Wilmer, Bramble & Penniman, Baltimore, Md., for plaintiffs.

Paul Berman and Arnold Fleischmann, Baltimore, Md., for defendant Burroughs.

Shale D. Stiller, M. Peter Moser and Frank, Bernstein, Conaway & Goldman, Baltimore, Md., for defendant Tsourounis.

Norman P. Ramsey, David F. Albright and Semmes, Bowen & Semmes, Baltimore, Md., for defendant Maryland Nat. Bank.

Samuel J. DeBlasis and DeBlasis & Kahler, Washington, D. C., for defendant Hoke Coin Machine Service, Inc.

Jerrold V. Powers, Upper Marlboro, Md., for defendant Halkos.

THOMSEN, Chief Judge.

Defendants Tsourounis and Maryland National Bank have moved to dismiss the amended complaint herein (1) for failure to state a claim upon which relief can be granted, (2) for lack of jurisdiction over the subject matter because this Court has no jurisdiction in matters of probate and estate administration, (3) on grounds of comity, and (4) on the basis of the abstention doctrine. The requisite diversity of citizenship and amount in controversy are not disputed.

The Complaint

The amended complaint alleges in substance:

Plaintiff Akrotirianakis is one of the residuary beneficiaries named in the will of the late George Perry, which was duly admitted to probate in the Orphans' Court of Prince George's County, Maryland, on June 11, 1963. Akrotirianakis is attorney-in-fact for the other residuary beneficiaries, all of whom are citizens and residents of Greece, and the action is brought by Akrotirianakis on his own behalf and on behalf of the other residuary beneficiaries.

Defendants Burroughs, Tsourounis and Maryland National Bank are the executors and trustees named in Perry's will. Letters testamentary were issued to them by the Orphans' Court on June 11, 1963, and they qualified by posting bond in the amount of $40,000 for the faithful performance of their duties as executors.

Perry's will directed that the executors take possession of all his real and personal property, sell and reduce the same to cash and, after payment of all debts, obligations and specific bequests, hold the residuary estate as trustees for the benefit of plaintiffs herein and, upon termination of the trust, distribute the residuary estate to plaintiffs.

Until April 1962 Perry owned and operated the Village Barn Restaurant and Night Club on Suitland Road in Prince George's County. The property consisted of about three acres of land and a building housing the restaurant and an ABC store. In April 1962 Perry leased the property to Village Barn Corporation, which was then owned jointly by two men not involved in this case. At the same time Perry sold to Village Barn Corporation the furnishings, fixtures, good will and stock in trade of the Village Barn Restaurant and the adjacent ABC store, together with his interest in the ABC license under which the Restaurant was operated, for $82,500. Of this amount Village Barn Corporation paid Perry $20,000 in cash and delivered to him its note for $62,500, secured by a chattel mortgage on the furnishings, fixtures and interest in the ABC license. In accordance with the terms of the note, Village Barn Corporation paid Perry $500 a month for interest and reduction of principal until Perry's death in May 1963, but after his death no more payments were made.

At or about the time of Perry's death defendant Tsourounis and his nephew, defendant Halkos, purchased a fifty percent interest in Village Barn Corporation, which they still hold. Defendant Burroughs, as attorney for Village Barn Corporation, participated in the negotiations.

An appraisal of the real estate and personal property owned by Perry at the time of his death, made at the direction of the Orphans' Court, showed a value of $60,000 for the Village Barn property, and $31,250 for the chattel mortgage note.

In August 1964 defendants Burroughs, Tsourounis and the Bank, as executors of Perry's estate, sold and transferred to defendant Hoke Coin Machine Service for $63,000 the land and building comprising the Village Barn property, together with the chattel mortgage note. On the same day and at the same time Hoke transferred the land, building and chattel mortgage note to defendant Halkos for the same consideration, $63,000. It is alleged that in receiving title to the real property and the chattel mortgage note, Hoke and Halkos were mere conduits by which the beneficial interest and ownership in the property and note became vested in Tsourounis, that Burroughs was aware of the interest of Tsourounis in the Village Barn Corporation and was aware that Hoke was a conduit through which Tsourounis obtained such beneficial interest. Thus, Burroughs, Tsourounis and the Bank, as executors and trustees of the estate of Perry, in breach of their fiduciary obligations to plaintiffs as the residuary heirs and trust beneficiaries of the estate, permitted one of the trustees, Tsourounis, to acquire trust property having a total value substantially in excess of the sale price received for such property. It is further alleged that Burroughs also breached his duties as fiduciary by misinforming and misleading plaintiffs into the belief that the offer of $63,000 made by Hoke was a bona fide offer, and by not disclosing to plaintiffs that Hoke was acting merely as a conduit. As a result, although plaintiffs were of the belief that the sale price did not reflect the true value of the property, they lacked sufficient information upon which to file an objection to the sale in the Orphans' Court, and did not become aware of the true facts surrounding the transaction until sometime after the executors had filed their final administration account on July 26, 1966, and the Orphans' Court had approved that account.

Plaintiffs pray for an order: (1) setting aside the sale of the Village Barn property and chattel mortgage note; (2) requiring defendants to make plaintiffs whole for the loss to the estate resulting from defendants' breach of trust; (3) requiring defendants Tsourounis and Halkos to account for all profits received from the Village Barn Corporation, and all amounts received as rents or other payments in connection with the Village Barn property; (4) awarding plaintiffs such further sums as shall be determined by this Court to be appropriate damages for defendants' breach of trust; and (5) granting plaintiffs such other and further relief as the Court may deem just and proper.

Discussion

The amended complaint alleges facts which, if proved, would justify rescission of the sale on grounds of fraud and breach of fiduciary duty. Defendants contend, however, that this Court lacks jurisdiction over the subject matter because it has no jurisdiction in matters of probate and estate administration. Plaintiffs deny that the case comes within that principle.

The rule in this Circuit was authoritatively stated¹ in Foster v. Carlin, 4 Cir., 200 F.2d 943, 947 (1952), as follows:

"The law is well settled that the federal courts have no jurisdiction over matters within the exclusive jurisdiction of state probate courts. However, as to matters which do not involve administration of an estate or the probate of a will, but which may be determined in a separate action inter partes in the courts of general jurisdiction of the state, the federal courts do have jurisdiction if the requisite diversity of citizenship exists.

"`In each case the jurisdictional question can be decided by determining whether the action could be maintained in a state court of general jurisdiction in the state where the federal court sits.' Illinois State Trust Co. v. Conaty, D.C.R.I., 104 F.Supp. 729, 731, citing Ferguson v. Patterson, 10 Cir., 191 F.2d 584."

The Fourth Circuit discussed a number of earlier decisions, including Markham v. Allen, 326 U.S. 490, 66 S.Ct. 296, 90 L.Ed. 256 (1946), where the Supreme Court said:

"* * * while a federal court may not exercise its jurisdiction to disturb or affect the possession of property in the custody of a state court * * * it may exercise its jurisdiction to adjudicate rights in such property where the final judgment does not undertake to interfere with the state court's possession save to the extent that the state court is bound by the judgment to recognize the right adjudicated by the federal court." 326 U.S. at 494, 66 S.Ct. at 298.

The property in question is not in the possession or control of a state court. It was sold to Hoke Coin Machine Service by the executors pursuant to the power contained in the will and the order ratifying the sale entered by the Orphans' Court.

The effect of the order ratifying the sale and the power of the Orphans' Court in connection therewith are clearly stated in Sykes, Maryland Probate Law and Practice, the recognized authority on the subject in Maryland, at § 658:

"A sale by an executor under a power in a will is not `valid or effectual' unless ratified and confirmed by the Orphans' Court, or by an equity court, if the executor has chosen to administer his trust there. An order nisi must be published in the same manner as practiced in cases of sales of lands under decrees in equity. The sale may, however, be ratified immediately, without publication, if all the parties are sui juris and give their consent to an immediate ratification. The jurisdiction of the Orphans' Court extends no further than to confirm or reject the sale. A sale ratified by the court stands on the same footing as an ordinary contract of sale made between persons competent to contract. The court can neither decree specific performance nor

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