Ex parte SouthTrust Bank of Alabama, N.A.
Decision Date | 19 April 1996 |
Citation | 679 So.2d 645 |
Parties | Ex parte SOUTHTRUST BANK OF ALABAMA, N.A., as co-trustee of Paul M. Penney testamentary trust. (Re Hal G. LAND, Jr., as co-trustee of the Paul M. Penney testamentary trust v. SOUTHTRUST BANK OF ALABAMA, N.A., as co-trustee of the Paul M. Penney testamentary trust). 1950236. |
Court | Alabama Supreme Court |
Henry Frohsin and Michael R. Silberman of Berkowitz, Lefkovits, Isom & Kushner, Birmingham, for Petitioner.
William Kent Upshaw and Kelli Hogue-Mauro of Holt, Cooper & Upshaw, Birmingham, for Respondent.
The issue presented by this petition for the writ of mandamus is whether the trial judge properly denied the defendant's motion to strike the plaintiff's jury demand in a case in which a co-trustee of a testamentary trust sued the other co-trustee alleging breach of fiduciary duty and negligence in regard to its duties in the administration of the trust and seeking recovery of all losses attributable to the breach of fiduciary duty. Stated differently, the question is whether the plaintiff's claims are within the exclusive jurisdiction of equity; we conclude that they are and we grant the writ.
Most of the controlling facts are not disputed. At his death in 1971, Paul Penney established a testamentary trust for the benefit of his widow Ethel Penney. The trust instrument named both Ethel Penney and First National Bank of Birmingham as co-trustees. The petitioner, SouthTrust Bank of Alabama, N.A. ("SouthTrust"), is a successor co-trustee. The trust property consisted principally of real estate that produced income through various leases and coal mining operations. The trust instrument provides that income produced by the trust is to be paid to Ethel Penney." 1 When Ethel Penney died in August 1991, her brother, Hal G. Land, Jr., succeeded her as co-trustee.
Shortly thereafter, Land discovered that Ronald W. Payne, who was acting as a coal agent under an arrangement with SouthTrust, was embezzling a portion of the coal royalties he collected and was concealing his thefts by submitting falsified coal tonnage reports. Land maintains that SouthTrust has refused to compensate him fully for the monies embezzled by Payne, and, as a result, Land sued SouthTrust, alleging breach of fiduciary duty by SouthTrust, as a co-trustee, in the administration of the trust of Paul M. Penney.
The gravamen of the complaint, filed by successor co-trustee, Hal G. Land, Jr., is that SouthTrust negligently failed to exercise supervision and control over Payne, who, under an agreement with SouthTrust, was to collect coal royalties and remit the same to SouthTrust, less a commission; 2 Payne pleaded guilty to embezzling over $300,000 of the funds.
In his complaint Land alleged that SouthTrust was negligent in regard to its duties in the administration of the Paul M. Penney Trust in the following respects:
"(a) In failing and neglecting to exercise proper supervision and control over Payne and his receipts; (b) in neglecting and failing to obtain financial security from Payne as provided under its contract; (c) in neglecting and failing to regularly and periodically audit or review Payne's receipts or to make independent verification of those receipts through the coal operators making such remittances; and (d) in neglecting and failing to implement and adopt a system of suitable control and audits of its trust department so as to ascertain whether the department was being administered in accordance with the law and sound fiduciary principles."
Land contends that Payne acted as SouthTrust's employee, but SouthTrust disputes this assertion. SouthTrust claims that Payne was not its employee, but that it entered into a contract with Payne under which Payne agreed to collect coal royalties on behalf of the Trust in exchange for the Trust's payment of a commission based upon the amount of royalties Payne collected.
Land demanded a trial by jury on all issues raised in the complaint. SouthTrust moved to strike Land's jury demand, and when the trial judge denied its motion SouthTrust filed this petition for a writ of mandamus.
A mandamus petition is a proper method for reviewing the issue here presented. 3 SouthTrust maintains that Land's claim alleging a breach of fiduciary duty concerns the administration of a trust by a trustee, and that Land is not entitled to a jury trial because, it says, this action is exclusively equitable in nature and the right to a jury trial does not extend to equitable claims. We agree. This Court has previously considered a similar issue. In First Alabama Bank of Huntsville, N.A. v. Spragins, 475 So.2d 512 (Ala.1985), beneficiaries of a trust sued a bank, as trustee, claiming that the bank had breached its fiduciary duty as trustee. The plaintiffs demanded a jury trial. In that case, just as in this case, the trial judge denied the trustee bank's motion to strike the jury demand. This Court wrote:
475 So.2d at 513. In Spragins, the Court discussed how "the modern trust is an outgrowth of the ancient cestui que use," and said:
In Spragins this Court followed the holding in First Alabama Bank of Montgomery, N.A. v. Martin, 425 So.2d 415 (Ala.1982), cert. denied, 461 U.S. 938, 103 S.Ct. 2109, 77 L.Ed.2d 313 (1983)--that remedies to enforce rights arising under a trust have been relegated to the exclusive jurisdiction of equity:
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