Georges v. Glick

• Decision Date: 31 October 1988
• Docket Number: No. 87-3129,87-3129
• Citation: 856 F.2d 971
• Parties: Basil GEORGES, Alexander Georges, George J. Georges, Ted Georges, Dorothy G. Stacy, Efrosini Derehanis, and Dora Derehanis, Plaintiffs-Appellants, v. Marvin GLICK, and Baum, Glick & Wertheimer, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 971

856 F.2d 971

Basil GEORGES, Alexander Georges, George J. Georges, Ted Georges, Dorothy G. Stacy, Efrosini Derehanis, and Dora Derehanis, Plaintiffs-Appellants, v. Marvin GLICK, and Baum, Glick & Wertheimer, Defendants-Appellees.

No. 87-3129.

United States Court of Appeals Seventh Circuit.

Argued May 17, 1988.

Decided Sept. 14, 1988.

Rehearing and Rehearing En Banc Denied Oct. 31, 1988.

Andrew D. Hurwitz, Meyer, Hendricks, Victor, Osborn & Maledon, Phoenix, Ariz., for plaintiffs-appellants.

Peter A. Quilici, Horvath & Wigoda, Chicago, Ill., for defendants-appellees.

Before CUDAHY, FLAUM, and RIPPLE, Circuit Judges.

RIPPLE, Circuit Judge.

This is an appeal from an order of the district court dismissing the case for lack of subject matter jurisdiction. The court determined that it did not have jurisdiction because the suit fell within the "probate exception" to federal diversity jurisdiction. We reverse the judgment of the district court.

I Background

On January 20, 1978, William S. Deree executed his last will and testament. The will was drafted by the defendant, Marvin Glick, and provided that all of Mr. Deree's property would be left to the William S. Deree Revocable Trust (the Trust). The Trust documents also were prepared by Mr. Glick and were executed on the same day. At this time, Mr. Deree and his second wife, Roberta Deree, entered into a post-nuptial agreement. The post-nuptial agreement and the Trust limited Mrs. Deree's interest in the Trust to $600,000, to be distributed upon Mr. Deree's death. ¹ The balance of the trust corpus was to be distributed in equal shares upon Mr. Deree's death to his thirteen nieces and nephews.

On May 29, 1981, Mr. Deree amended the Trust. This amendment provided that, upon Mr. Deree's death, each of his nieces and nephews would receive $5,000 and Mrs. Deree would receive the balance of the trust estate. This amendment was drafted by Mr. Glick and had the effect of increasing Mrs. Deree's share of the trust from approximately $700,000 to approximately $2,000,000.

Mr. Deree died on November 8, 1982 at the age of ninety-one. He had been a long-time resident of Illinois, but was domiciled in Arizona when he died. On June 13, 1983, Mr. Deree's personal representative filed an application for informal probate of Mr. Deree's will in Arizona state court. In July 1983, Mr. Deree's thirteen nieces and nephews filed a separate action in an Arizona court (the Arizona suit) against, inter alia, Mrs. Deree. Mr. Glick was not a defendant in this suit. The Arizona suit sought to void the May 1981 amendment to the Trust on the grounds that Mr. Deree was mentally incompetent and was under undue influence at the time that he executed it. This suit was filed in the Civil Division of the Superior Court of Maricopa County, Arizona. Mrs. Deree filed a motion to transfer the suit to the Superior Court's Probate Division, but this motion was denied. See Georges v. Wilson, No. C 492073, order at 1 (Super.Ct.Ariz., Mar. 22, 1985); Appellants' App. at 27a. Before the case went to trial, the plaintiffs entered into a settlement agreement with Mrs. Deree pursuant to which the nieces and nephews received a total of $500,000 plus attorneys' fees. Because Mr. Glick and his law firm were not parties to this suit, they were not parties to the settlement agreement. Consequently, the terms of this settlement did not purport to release potential claims against them.

On January 30, 1986, seven of Mr. Deree's nieces and nephews filed the present suit. The plaintiffs submit, and the defendants do not disagree, that this action could not have been brought in Arizona because the defendants are not amenable to personal jurisdiction there. The complaint alleged that Mr. Glick knew that Mr. Deree was mentally incompetent, nearly blind and deaf, and acting under the undue influence of Mrs. Deree when he prepared the May 1981 amendment to the Trust. The plaintiffs asserted causes of action for legal malpractice, breach of contract to the plaintiffs as third-party beneficiaries of the Trust, breach of fiduciary duty, and interference with the plaintiffs' inheritance from the Trust. After the parties had completed discovery, the defendants filed a motion for summary judgment and the plaintiffs filed a cross-motion for partial summary judgment. The defendants' motion contended that the plaintiffs' action was barred by the finality of the Arizona probate proceedings. However, the defendants did not question the district court's subject matter jurisdiction. The district court rejected the defendants' argument that the action was barred by the finality of Arizona probate proceedings. However, the court went on to consider, sua sponte, whether the plaintiffs' suit should nevertheless be dismissed for lack of subject matter jurisdiction. The court concluded that the probate exception to federal diversity jurisdiction applied in this case and dismissed the plaintiffs' suit. This appeal followed.

II Analysis

The general framework for the exercise of federal diversity jurisdiction is set forth in 28 U.S.C. Sec. 1332. The statute provides in relevant part:

(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between--

(1) citizens of different States;

(2) citizens of a State and citizens or subjects of a foreign state;

(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and

(4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States.

28 U.S.C. Sec. 1332(a). The statute says nothing about an exception to diversity jurisdiction for probate matters. The exception is created by the judiciary, not by Congress. Consequently, we must construe the exception narrowly. See Rice v. Rice Foundation, 610 F.2d 471, 475 (7th Cir.1979) ("[T]he federal courts construe the meaning of 'probate' quite narrowly to limit the scope of the exception."); see also Loyd v. Loyd, 731 F.2d 393, 397 (7th Cir.1984) (the probate exception is not a hard and fast jurisdictional rule, and federal courts have shown some willingness to find the exception nonoperable). The precise scope of the probate exception has not been clearly established. See Rice, 610 F.2d at 475-76. Certainly the actual probate of a will is within the exception. See Markham v. Allen, 326 U.S. 490, 494, 66 S.Ct. 296, 298, 90 L.Ed. 256 (1946); Rice, 610 F.2d at 475. Beyond that, the contours of the exception are vague and indistinct. As a general matter, courts tend to view the probate exception as extending to all suits "ancillary" to the probate of a will. See, e.g., O'Callaghan v. O'Brien, 199 U.S. 89, 110, 25 S.Ct. 727, 733, 50 L.Ed. 101 (1905); Dragan v. Miller, 679 F.2d 712, 715 (7th Cir.), cert. denied, 459 U.S. 1017, 103 S.Ct. 378, 74 L.Ed.2d 511 (1982); Rice, 610 F.2d at 476. However, the definition of "ancillary" is not well established. Cf. Rice, 610 F.2d at 476.

While the scope of the exception has not been established definitively, this court has identified several bases for the probate exception that can serve as useful guides to decision. See Dragan, 679 F.2d at 713-17; Rice, 610 F.2d at 475-76. The first of these bases is historical. Dragan, 679 F.2d at 713. "The Judiciary Act of 1789, ch. 20, Sec. 11, 1 Stat. 78, conferred on the federal courts, in diversity cases, concurrent jurisdiction over 'all suits of a civil nature at common law or in equity.' " Id. Because "suits of a civil nature at common law or in equity" were assigned in eighteenth-century England either to common-law courts or the chancery court, and since probate matters were assigned to the ecclesiastical court, it is at least arguable that probate matters "were not included in the Judiciary Act's grant of jurisdiction to the federal courts." Id. Apparently for this reason, the Supreme Court said in Markham that "a federal court has no jurisdiction to probate a will or administer an estate...." 326 U.S. at 494, 66 S.Ct. at 298. A second and "practical," rationale for the probate exception is the need for legal certainty concerning whether probate matters and will contests should be in state or federal courts. Dragan, 679 F.2d at 714. "Certainty is desirable in every area of the law but has been thought especially so with regard to the transfer of property at death." Id. The thrust of this rationale is that state courts may be the better situs for probate matters because of the relative expertise of state courts with respect to their own probate law. Id. A third rationale is judicial economy. Id. By restricting probate matters and will contests to state courts, questions as to a will's validity can be resolved concurrently with the task of estate administration. Finally, a fourth rationale for the exception is to avoid unnecessary interference with state probate proceedings. Rice, 610 F.2d at 475. "Once a suit can be characterized as not involving 'pure probate,' the inquiry ... becomes whether resolution of the suit by the federal court will result in 'interference' with the state probate proceedings or the assumption of general probate jurisdiction." Id. at 475-76.

The application of these factors to the case before us makes it clear, we believe, that the probate exception to diversity jurisdiction is not applicable here. Neither historical considerations nor the more practical consideration of certainty in probate matters require the application of the exception. This case does not involve the actual probate of a will; nor does it affect directly the probate res. Mr. Deree's estate...