Cassity v. Pitts
| Decision Date | 17 June 1993 |
| Docket Number | No. 92-7112,92-7112 |
| Parties | RICO Bus.Disp.Guide 8329 Edward J. CASSITY; Martin M. Cassity, Jr.; George E. Cassity, individually and as personal representatives of the Estate of Martin M. Cassity, Sr., deceased; and William R. Cassity, Plaintiffs-Appellants, v. Paul E. PITTS; William V. Wiist; Thomas Dunlap; the Ardmore Institute of Health, Inc., an Oklahoma Corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Submitted on the briefs. *
Douglas C. McBee of Andrews Davis Legg Bixler Milsten & Price, and Delmer L. Stagner, Oklahoma City, OK, for plaintiffs-appellants.
Andrew M. Coats and Wesley C. Fredenburg of Crowe & Dunlevy, Oklahoma City, OK, for defendants-appellees.
Before LOGAN, MOORE and BRORBY, Circuit Judges.
The beneficiaries (Beneficiaries) of a trust commenced a civil action against the trustees (Trustees) raising RICO claims and state fraud claims. The district court dismissed the action for lack of subject matter jurisdiction and Beneficiaries appeal. We affirm.
In 1984, Dr. Johnson died leaving a residuary trust, and appellants were the life beneficiaries of this trust. A probate action was commenced in state court as was a separate civil action to reform the trust. Beneficiaries and Trustees ultimately resolved their differences and entered into a written Settlement Agreement. The net effect of this Settlement Agreement was that Trustees conveyed to Beneficiaries substantial assets and Beneficiaries gave a complete release of their interests in the trust and released their claims against Trustees. The state court, in 1987, entered a final order in the trust reformation case disposing of all issues and further retaining jurisdiction. The pertinent provision of the state court decree states "[The court] retains and continues jurisdiction [of the trust] and the parties hereto for all future constructions of the trust or the duties, obligations and responsibilities of the Trustees."
In 1990, Beneficiaries commenced an action against Trustees attacking their administration of the trust and seeking various trust properties. This action was commenced in the United States Court for the District of Texas based upon diversity jurisdiction. The Texas federal court dismissed this action reasoning it lacked subject matter jurisdiction as follows:
The relief requested by Plaintiffs would, among other things, require that the Court order an accounting of the trusts, interpret the trust indenture, and determine whether the Trustees acted in accordance with the terms of the Trust Indenture. Such functions are in the nature of an in rem proceeding, both in the view of this Court, and pursuant to 60 Okl.Stat. 1971 § 175.23A. [Footnote omitted.]
Since this action is in rem or quasi in rem, the Court must acquire jurisdiction over the trust estate in order to render a decision which affects the res. Wilcoxson v. Security Bank and Trust Company of Lawton, Lawton, Oklahoma, 516 F.Supp. 3, 4 (W.D.Okla.1980) (citing Princess Lida v. Thompson, 305 U.S. 456 (1939)). Further, "[A] court's otherwise valid power to take jurisdiction of an in rem action is qualified by the rule that when a court of competent jurisdiction has obtained possession, custody, or control of the disputed res in an in rem action, that possession cannot be disturbed by any other court." Key v. Wise, 629 F.2d 1049, 1059 (5th Cir.1980) (citations omitted). Thus, a reviewing court is restrained from asserting jurisdiction over any action involving the same property until the initial court's jurisdiction is terminated. 629 F.2d at 1059, (citing Farmers Loan & Trust Co. v. Lake St. Elevated R. Co., 177 U.S. 51 [20 S.Ct. 564, 44 L.Ed. 667] (1900)).
The preceding discussion makes it clear that in order for this Court to assert jurisdiction, the jurisdiction of the state court must be terminated. Because that court has specifically retained jurisdiction over all matters related to the construction and interpretation of the trusts in issue, the Court is of the opinion that it is without jurisdiction to decide Plaintiffs' claim.
In 1991, Beneficiaries filed a claim in state court in the original trust reformation case. In this proceeding, Beneficiaries raised claims of trust invalidity, breach of fiduciary duties by Trustees, embezzlement, and conflicts of interest. The state court granted partial summary judgment in favor of Trustees subject only to Beneficiaries' allegations of misrepresentations. This issue was set for trial on July 6, 1992. The Trustees' counterclaims were also left pending prior to trial; however, Beneficiaries dismissed their misrepresentation claims in June 1992. The state court continued to exercise jurisdiction and subsequently upheld the validity of the Settlement Agreement and further held Beneficiaries had breached this agreement. The state court also ordered Beneficiaries to pay attorney fees as sanctions and as damages and ruled "this case is over."
The day before Beneficiaries dismissed their remaining state court claims, they filed this civil action seeking relief against Trustees for their administration of the trust and fraud. The claims were predicated upon RICO and a state fraud claim. Beneficiaries also sought a declaration that the trust was void.
Trustees filed a motion to dismiss this action due to a lack of subject matter jurisdiction. The district court, reasoning that any decision it would make would require it to rule on the validity, ownership and administration of the trust, and upon the powers, duties and liabilities of the trustees, decided the state court had jurisdiction and the federal court lacked jurisdiction. Beneficiaries appeal the decision asserting: (1) they have a constitutional right to assert their claims in federal court rather than state court; (2) as the state court was not actively exercising its in rem jurisdiction over the trust, the federal court could not refuse jurisdiction; and (3) as the relief sought would not interfere with the state court's power to administer the trust, the district court has jurisdiction.
We review the district courts dismissal for lack of jurisdiction de novo and give no deference to the district court's decision. Thomas Brooks Chartered v. Burnett, ...
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