Davidson v. Blaustein

• Decision Date: 16 November 1965
• Docket Number: Civ. A. No. 16459.
• Parties: Lisa Joy DAVIDSON and Julie Gail Davidson, infants, by Martin J. Davidson, their next friend, Plaintiffs. v. Jacob BLAUSTEIN, Defendant.
• Court: U.S. District Court — District of Maryland

247 F. Supp. 225

Lisa Joy DAVIDSON and Julie Gail Davidson, infants, by Martin J. Davidson, their next friend, Plaintiffs. v. Jacob BLAUSTEIN, Defendant.

Civ. A. No. 16459.

United States District Court D. Maryland.

November 16, 1965.

Alfred L. Scanlan, Bethesda, Md., David J. Preller, Baltimore, Md., Shea & Gardner, Washington, D. C., for plaintiffs.

John W. Cable, III, John S. McDaniel, Jr., Cable & McDaniel, Baltimore, Md., for defendant.

WINTER, District Judge:

Defendant moves to dismiss the complaint in the above case for failure to state a claim upon which relief can be granted. Rule 12(b), Fed.Rules of Civil Procedure. The complaint seeks an accounting, upon the following allegations, made on information and belief:

The infant plaintiffs state that the defendant, their great uncle, is the trustee under certain inter vivos trusts created by the late Mr. and Mrs. Louis Blaustein (their great grandparents and the parents of the defendant), the late Mr. Henry Rosenberg, Sr. (their grandfather and the brother-in-law of the defendant), and Mrs. Henry Rosenberg, Sr. (their grandmother and sister of the defendant). The plaintiffs are citizens of the State of Texas, defendant is a citizen of the State of Maryland.

It is alleged that the trusts are in active existence, have not been terminated, and are being administered by the defendant as trustee, and that the assets within such trusts include substantial real and personal property interests, including extensive and very valuable securities. The terms of the trusts require the trustee to pay income to certain designated life beneficiaries, with the corpus thereof required to be paid by the trustee to other beneficiaries, at a time or times, or under conditions which are not known by the plaintiffs or their next friend. The plaintiffs believe that they were named, either by name or as members of a designated class, as beneficiaries under the trusts, and, under the terms of such trusts, at a time or times, or upon the happening of certain conditions, all of which are unknown to the plaintiffs or their next friend, the plaintiffs are entitled to receive portions of the corpus of the trusts from the trustee in accordance with the directions of the respective settlors.

It is further alleged that defendant has never accounted for his acts and transactions as trustee of the several trusts (since Mr. Louis Blaustein is alleged to have died in 1938, defendant is alleged to have given no accounting of this trust for almost thirty years); has never disclosed to the plaintiffs, or to anyone authorized to act in their behalf, any information concerning the trusts in regard to their scope, assets, beneficiaries, duration, or termination dates. Through their father and next friend, plaintiffs have demanded that defendant account to them for his administration of the trusts, and defendant has refused to do so, asserting that "* * * under the existing circumstances you are not entitled to an accounting or other information" with respect to the trusts.

As relief, plaintiffs pray that the defendant file an account under any and all inter vivos trusts in which he has been named as trustee, and in which the plaintiffs have been designated beneficiaries, either by name or as members of a designated class. The time and manner of filing the account are specified, and there is a general prayer for other relief.

The essential allegations of the complaint have been summarized. In addition to them, it is significant to note what plaintiffs do not allege. Although plaintiffs allege that under the terms of the trusts, at some future time and on the happening of certain conditions (both unknown to them), they are entitled to receive portions of the corpus of the trusts, they do not allege, even on information and belief, that they have a possessory estate, i. e., that they are entitled at the present time to receive any portion of the income or corpus of the trusts, or that they will ever have a possessory estate. Indeed, their allegation in regard to each of the trusts that there are certain designated life beneficiaries not claimed to be themselves, coupled with the absence of any allegation that the life beneficiaries are deceased, is tantamount to an affirmative allegation on their part that their interests, if any, are not possessory. Other than to complain that they have been denied information of the type which they demanded, they allege no wrongdoing, mismanagement or waste on the part of the trustee.

At least for purposes of the present motion, plaintiffs admit that the law of Maryland controls the decision to be given. See Gaylord v. C. I. R., 153 F.2d 408 (9 Cir. 1946). Under Maryland law, as indeed under the law of other jurisdictions, a cause of action against a trustee for an accounting affords two distinct types of relief. It provides information to determine if any liability exists as regards the trustee (discovery), and it enforces the responsibility of the trustee for any liability which he may have incurred in the management of the trust estate (affirmative relief). The liability of a trustee may be for mismanagement, waste, dissipation of assets, or other misconduct, or liability to make payments of income or corpus, or both, in accordance with the trust instrument creating the trust. The basis upon which these types of liability may be asserted under Maryland law will be considered first.

Under Maryland law an accounting against a trustee may be had where an income beneficiary seeks to recover income, establishes his right therefor, and an accounting is necessary to determine the amount. See Rappold et al. v. Rappold, 224 Md. 131, 166 A.2d 897 (1961); Ex parte Nicholas, 142 Md. 601, 121 A. 627 (1923); Baer v. Kahn et al., 131 Md. 17, 101 A. 596 (1917) (dictum); Ehlen v. Ehlen, 63 Md. 267 (1885). An accounting may also be had where a beneficiary entitled to the corpus seeks to recover corpus, establishes his right thereto, and an accounting is necessary to determine the amount. Smith et al. v. Townshend et al., 27 Md. 368 (1867); Fenby et al. v. Johnson, 21 Md. 106 (1864). Cf. Baer v. Kahn et al., supra (dictum). Conversely, when a beneficiary entitled to corpus seeks to recover corpus, but it appears that the time for distribution of corpus is not at hand at the time of filing suit, an accounting will be refused. Harlan v. Gleason, 180 Md. 24, 22 A.2d 579 (1941). Where waste, mismanagement, dissipation of assets, or other misconduct, on the part of the trustee are alleged, and at least prima facie established, relief by accounting may also be granted a beneficiary. See Smith et al. v. Townshend et al., supra; Dennis et al. v. Dennis et al., 15 Md. 73 (1860). But absent a showing of want of good faith or abuse of discretionary powers by the trustee, a presently entitled beneficiary may be denied relief. See Baer v. Kahn et al., supra. Also, while a beneficiary with "* * * a potential future interest in the corpus * * *" may have standing to request an accounting to prevent dissipation of assets, relief will be granted only in exceptional cases. In re Clarke's Will, Clarke et al. v. Clarke, 198 Md. 266, 272, 81 A.2d 640, 642 (1951). The Court has been unable to find, and counsel have not cited, any case in which an accounting has been allowed, other than where an income or corpus beneficiary alleges either that he is entitled to a distribution of income or corpus, or both, which has not been made, or that there has been mismanagement, waste, dissipation of assets, or other misconduct, on the part of the trustee, and such allegation has been shown prima facie to be true. The conclusion follows that plaintiffs in the case at bar have made no allegation which would entitle them to relief by accounting under Maryland law, where they seek to assert liability against the trustee.

There remains to be considered plaintiffs' right to discovery, i. e., to require information of the trustee short of an assertion of liability on his part. Restatement, Trusts 2d § 173 (1959) states, as a general proposition of law, that a trustee is under a duty to a beneficiary to give the latter complete and accurate information as to the nature and amount of...