ART STUDENTS'LEAGUE OF NEW YORK v. Hinkley

• Decision Date: 11 March 1929
• Docket Number: No. 1172.,1172.
• Parties: ART STUDENTS' LEAGUE OF NEW YORK v. HINKLEY et al.
• Court: U.S. District Court — District of Maryland

31 F.2d 469 (1929)

ART STUDENTS' LEAGUE OF NEW YORK v. HINKLEY et al.

No. 1172.

District Court, D. Maryland.

March 11, 1929.

Venable, Baetjer & Howard and Charles McHenry Howard, all of Baltimore, Md., for complainant.

Joseph C. France, Hinkley, Hisky & Burger, Frederick J. Singley, and Stewart & Pearre, all of Baltimore, Md., and Ralph E. Lum, of Newark, N. J., for defendants.

SOPER, District Judge (after stating the facts as above).

The Art Students' League of New York, a New York corporation, filed a bill of complaint against John Hinkley, a citizen of Maryland, and Fidelity Trust Company of Baltimore, a Maryland corporation, trustees under the will of Edward G. McDowell, in order to establish by judicial decree that a power of testamentary appointment, conferred by the will upon Edward McDowell, the testator's son, was validly exercised in the latter's will. The bill asks that the trustees under the father's will be required to account for and pay over to the complainant certain property in their hands to which the complainant claims to be entitled by virtue of the will of the son. After the suit was brought, Beata McDowell Clayville-Smith, a daughter of the elder McDowell, and Catherine Beata Ward, her daughter, were joined as parties defendant.

Edward G. McDowell, of the city of Baltimore, state of Maryland, died on July 3, 1913, leaving surviving him a widow and two children — a son, Edward McDowell, and a daughter, Beata McDowell Ward, now Beata McDowell Clayville-Smith. The widow died on March 29, 1917. Edward G. McDowell by his will devised and bequeathed his residuary estate to the defendant trustees, and directed that they should divide it into three equal shares, one of which was to be held in trust for his wife for life, and to be divided after her death in equal shares between the other two shares. The testator left one of the two remaining portions of the residuary estate in trust for the benefit of his son, Edward McDowell, during his life, and directed that, in case he should die without leaving a child or descendant, he should be empowered to dispose of his part of the estate by last will and testament, and in case he should die without leaving child or descendant, and without exercising the power of testamentary disposition, his share, if the wife should then be dead, should be added to the share directed to be held in trust for the testator's daughter. The last-mentioned share the testator directed should be held in trust for the benefit of his daughter for life, and after her death upon further trusts with which we are not concerned in this case. The trustees were given full power of sale, lease, exchange, and other disposition of the trust property. The will was duly probated and the personal estate of the testator was duly administered in the orphans' court of Baltimore City, and the defendant trustees received and have since held both the real and personal estate which passed to them under the will. A division of the trust estate into three portions was made by the trustees, as directed by the will, and after the death of the testator's widow the share set apart for her benefit was subdivided and added to the two remaining shares.

Edward McDowell, the son, died on February 18, 1926, being a resident of the state of New Jersey at the time of his death. He left no child or descendant, but left a last will and testament, which was probated in the surrogate's office of Essex county, New Jersey, and has been hereinbefore fully set forth. It will be observed that the testator devised and bequeathed all of the residue of his estate to the complainant, in trust, to create a fund in memory of his father, to be known as the "Edward G. McDowell Traveling Scholarship," and to apply the income therefrom to the education of one or more deserving and talented art students for study abroad. The complainant believes that this will not only covered the individual estate of the testator, but constituted a valid exercise of the power of appointment over the property held in trust for him under the will of his father. Demand was accordingly made by the complainant upon the trustees to pay over and distribute to it all of the property and estate, but the trustees declined and refused to do so, doubting the validity of the will of the son as an exercise of the power of appointment; and hence this suit is brought.

The trustees, before answering the bill, filed a petition requesting the court to decline jurisdiction of the case on the ground that the circuit court of Baltimore City, which has a cognizance of equitable causes, had assumed jurisdiction of the trust estate in a cause therein entitled "Ex parte Trust Estate of Edward G. McDowell." The father's will expressly directed the trustees to administer the trust under the jurisdiction of one of the equity courts of Baltimore City. The trustees accordingly petitioned the circuit court of Baltimore City to assume jurisdiction of the trust, this action was taken by the court, and the trustees from the beginning have continuously administered the trusts under the court's direction. Consequently the trustees say the state court has acquired custody and control of the trust property. Their contention is that they are charged with a continuing trust under the jurisdiction of the state court, covering the entire estate which they now hold for the exclusive benefit of the daughter, and that the complainant's claim to the son's share raises a controversy which the state court, having first acquired jurisdiction, should settle without interference from the court of the United States.

The assumption of jurisdiction over the administration of the trust by the circuit court of Baltimore City is not founded upon statute, but conforms to a long-established practice in equity in this state. Trustees appointed by will may, of their own option and for their own protection and guidance, petition the equity court to assume jurisdiction of the trust, or, as in the case at bar, the instrument creating the trust may direct that the trust be administered under the supervision of the court. In either case, the proceeding is usually ex parte, as happened in the case at bar. The province of the court under these circumstances is described in Baer v. Kahn, 131 Md. 17, 25, 101 A. 596, 599, where it was said that if "a court of equity, by an appropriate decree, assumes jurisdiction of the trusts and directs them to be executed under its direction and supervision, the authorities agree that the situation of the trustees is thereby so far changed that they must thereafter secure the sanction or ratification of the supervising court for the successive steps of their administration of the trust."

The trustees refer chiefly to the case of Kline v. Burke Construction Co., 260 U. S. 226, 43 S. Ct. 79, 67 L. Ed. 226, 24 A. L. R. 1077, in which the Supreme Court held that an injunction against the prosecution of a suit in the state court involving identically the same issues as a prior suit in the federal court was improperly issued by the latter, since both actions were in personam and only money judgments were sought. In the course of the discussion the court said:

"It is settled that, when a state court and a court of the United States may each take jurisdiction of a matter, the tribunal whose jurisdiction first attaches holds it, to the exclusion of the other, until its duty is fully performed, and the jurisdiction involved is exhausted. * * * The rule is not only one of comity, to prevent unseemly conflicts between courts whose jurisdiction embraces the same subject and persons, but between state courts and those of the United States it is something more. `It is a principle of right and law, and therefore of necessity. It leaves nothing to discretion or mere convenience.' Covell v. Heyman, 111 U. S. 176 4 S. Ct. 355, 28 L. Ed. 390. The rule is not limited to cases where property has actually been seized under judicial process before a second suit is instituted in another court, but it applies as well where suits are brought to enforce liens against specific property, to marshal assets, administer trusts, or liquidate insolvent estates, and in all suits of a like nature. Farmers' Loan & Trust Co. v. Lake Street El. R. Co., 177 U. S. 51 20 S. Ct. 564, 44 L. Ed. 667; Merritt v. Steel Barge Co., 24 C. C. A. 530, 79 F. 228, 49 U. S. App. 85. The rule is limited to actions which deal either actually or potentially with specific property or objects."

The trustees rely especially upon the reference in this quotation to the administration of trusts. But it is noteworthy that no such question was involved in the case before the court. The inclusion of trusts in the statement of the rule seems to have originated in the opinion of Justice Shiras in Farmers' Loan & Trust Co. v. Lake Street El. R., 177 U. S. 51, 61, 20 S. Ct. 564, 44 L. Ed. 667. That was a suit for the foreclosure of a bond mortgage, and meanwhile for a receivership, which had first been filed in the federal court by the trustee under the mortgage. Subsequently the mortgagor applied for and got an injunction from the state court enjoining the trustee from foreclosing the mortgage. Under these circumstances, the Supreme Court held that the jurisdiction of the federal court having previously attached, the state court should not have issued the injunction. In referring to the administration of trusts, no doubt the court had in mind the trusts created by the bond mortgage for whose enforcement the foreclosure and receivership were required. The case has no similarity to that at bar.

The practice of the equity court in assuming jurisdiction of the administration of trusts under a will is somewhat analogous to a practice which was quite prevalent in Maryland before the National Bankruptcy Act (11 USCA), under which the property of an insolvent debtor was transferred by deed to an assignee for the benefit of creditors, and...