DiMauro v. Pavia

• Decision Date: 17 April 1979
• Docket Number: Civ. No. H-74-79.
• Citation: 492 F. Supp. 1051
• Court: U.S. District Court — District of Connecticut
• Parties: Sebastiana DiMAURO v. George M. PAVIA et al.

492 F. Supp. 1051

Sebastiana DiMAURO v. George M. PAVIA et al.

Civ. No. H-74-79.

United States District Court, D. Connecticut.

April 17, 1979.

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Keith D. Dunnigan and Arnold J. Bai, Bai, Pollock & Dunnigan, Bridgeport, Conn., for plaintiff.

Bruce Louden, Thomas A. Rouse, Hartford, Conn., for defendants.

MEMORANDUM OF DECISION ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

NEWMAN, District Judge.

The plaintiff in this action seeks damages and equitable relief for alleged fraudulent and negligent acts by defendants in the administration of the estate of the plaintiff's late husband. Defendants have moved on a variety of grounds for summary judgment on thirteen of fourteen counts in a second amended complaint (Complaint). They rely primarily, however, on two reasons set forth originally in their answer: that the plaintiff had an opportunity to present the basic claims in this case in a proceeding before the New York Surrogate's Court, and is barred by the decree in that Court from proceeding here; and that the plaintiff "directed, induced and consented" to the actions of defendants out of which the present case arises.

In the nine years since Orazio DiMauro died intestate in Italy, the dispute concerning the disposition of his estate has followed procedural paths leading to a suit of Dickensian complexity. The relevant facts can be derived from affidavits and the products of discovery had thus far,¹ as well as from previous court proceedings. The plaintiff Sebastiana DiMauro (DiMauro) is the sole heir of her husband Orazio, who died on January 25, 1970. The two had lived in Connecticut for several years before they returned to Italy in 1967. From his retirement in 1957 until his death, Orazio DiMauro's primary vocation was investing in the stock market. At his death, he owned securities in three corporations and a home in Siracusa, Italy; approximately 90% of the value of the estate was invested at that time in Harvey's Stores, Inc., a publicly traded corporation. On the date of death the shares of Harvey's Stores were worth approximately $840,000 (some 65,000 shares at nearly $13/share), and were held in a margin account with Francis I. duPont & Co. (duPont).

On December 30, 1969, Orazio DiMauro prepared a handwritten "Sworn Statement" setting forth his wishes for the disposition of his property. Among other provisions the statement included the instruction that the account at duPont "shall remain as it is intact. My stocks shall not be sold."² Because the statement was not a valid will, however, an intestacy resulted upon Orazio DiMauro's death. In May, 1970, a probate proceeding was begun in the Surrogate's Court of New York County,³ and shortly thereafter that Court appointed defendant George Pavia as administrator of the estate. In this capacity, Pavia retained as counsel the law firm of Pavia & Harcourt (of which he and defendant Edgar Harcourt are senior partners). Attorney Ugo Gianformaggio was retained as local counsel in Siracusa, Italy, where plaintiff DiMauro resided.

A series of communications with Mrs. DiMauro during the next three years concerned the Harvey's Stores stock held by the estate. In her initial conference with Gianformaggio, in July, 1970, Gianformaggio asserts that DiMauro expressed a strong desire that her husband's securities be retained.⁴ She executed a letter to Pavia to that effect. The letter had been prepared by Pavia, who had recently been nominated as administrator of the estate in New York; he had expressed his own opinion that the securities should not be sold at that time. Harcourt asserts that he told DiMauro by telephone on February 18, 1971, when Harvey's Stores stock was selling for approximately $26/share, that a prospective purchaser wanted the entire block of stock at a price between $20 and $22/share. DiMauro responded that she would not consider selling the stock for less than $30/share. A letter that Pavia wrote to DiMauro on the following day confirmed the information exchanged by phone. It further stated Pavia's conviction that the shares were not worth more than the $7 originally paid by Orazio DiMauro, and his doubts that the stock would remain at its current high price. Pavia specifically "declined any and all responsibility in this regard holding the stock until it reached 30."

In September, 1971, DiMauro refused to sell a 90-day option for a call of the entire block of Harvey's Stores stock at 20, and in November she stated that she wanted any sale to be exempt from tax. In January, 1972, attorney Emanuele Turco of the Rome office of Pavia & Harcourt wrote DiMauro of the speculative nature of the Harvey's Stores stock, and enclosed a copy of an article from the New York Times reporting that the S.E.C. had filed a civil suit concerning insider-trading in Harvey's Stores. In September, 1972, in response to a margin call made by duPont when Harvey's Stores stock dropped below 4, DiMauro authorized the sale of the other two securities in the estate but not of any Harvey's Stores stock. DiMauro continued to oppose the sale of that stock after her return to the United States in August, 1973.

Throughout this period following the death of Orazio DiMauro, legal proceedings went forward in both New York and Connecticut. After the New York probate proceeding was opened in May, 1970, a probate proceeding was also begun in the Probate Court of Bridgeport, Connecticut, in December, 1971, with Pavia again as administrator. A Connecticut succession tax return was filed in May, 1972. By order dated September 19, 1972, the Bridgeport Probate Court recited that the administrator had settled his account and that the entire amount remaining after payment of taxes, debts, fees and expenses should be distributed to Sebastiana DiMauro.

After DiMauro's return to this country in 1973, Harcourt wrote her in November of his opinion that all the stock in Harvey's Stores should be sold, and of his intent to sell at least enough of the stock to satisfy the remaining obligations of the estate, unless he heard from her to the contrary. DiMauro then retained counsel in Connecticut, who met with Harcourt in December. Pavia petitioned the New York Surrogate's Court for a final accounting and judicial settlement, and a citation to DiMauro was issued on January 10, 1974. The citation was for a proceeding scheduled for February 1, 1974, to settle Pavia's account as administrator, to fix and allow the fees of Pavia & Harcourt, and to authorize Pavia to sell as many of the shares of stock held in the estate as would be necessary to pay the balance of fees, commissions, costs and disbursements. The citation noted that failure to appear would be taken as consent to the proceedings, unless written objections were filed. At the February 1 proceeding, Harcourt appeared for Pavia, and DiMauro's Connecticut counsel was present but did not enter an appearance. Connecticut counsel was advised that he could, if he desired, retain New York counsel to enter an appearance, and was granted a two-week extension for this purpose.

According to plaintiff's answers to defendants' interrogatories, her Connecticut counsel decided that the more proper response was to file suit in Connecticut. The instant action was commenced in the Superior Court for Fairfield County by a complaint dated February 12, 1974. At the same time, DiMauro applied for and was granted an ex parte injunction that prohibited Pavia, Harcourt, and their law firm from "taking any further action in connection with the estate, including but not limited to any further proceedings in the Surrogate's Court for the County of New York." The suit in Superior Court was removed to this Court on diversity grounds by petition dated March 11, 1974.

In September, 1975, Pavia filed an affidavit of services with the New York Surrogate's Court, seeking commissions and fees. The Surrogate's Court filed a "Decree on Accounting" on October 6, 1975, on the basis of the petition, citation, and subsequent proceedings in that Court during January and February, 1974. The decree stated that the citation to DiMauro had been returned with proof of due service,⁵ that Pavia had rendered his account to the Surrogate under oath on the return date of the citation, and that no objections had been made to the account. The decree set forth the administrator's commissions and costs and the legal fees that were being allowed; it authorized the sale of a sufficient number of shares held by the estate to satisfy the payments; it ordered Pavia to transfer to DiMauro all cash and securities remaining in his hands after the payments; and it ordered the account judicially settled. The distributions to DiMauro were completed by March, 1976.

DiMauro's general allegations in this suit are that the final account of Orazio DiMauro's estate was filed negligently with the Bridgeport Probate Court, in failing to exhibit the true nature of the estate (Count Twelve of the Complaint), that Pavia failed to administer the estate faithfully in accordance with his legal obligations (Count Thirteen), and that the firm of Pavia & Harcourt failed to advise the administrator of the estate with the care required of the legal profession (Count Fourteen). More specifically, DiMauro's Complaint asserts that Pavia failed to make the distribution of estate assets ordered by the Probate Court (Count One), and that the affidavit of return stating that such distribution had been made was misleading and fraudulent (Count Two). The defendants are charged with having caused financial loss to the estate by their failure to pay the claims against the estate (in particular, the margin account at duPont) that the final account submitted to the Probate Court recited as having been paid (Count Three), to administer the estate in timely fashion (Count Four), to divest the Harvey's Stores stock within a reasonable time (Count Six),...