In re Marshall
| Decision Date | 30 December 2004 |
| Docket Number | No. 02-56002.,No. 02-56067.,02-56002.,02-56067. |
| Citation | 392 F.3d 1118 |
| Parties | In re: Vickie Lynn MARSHALL, Debtor. E. Pierce Marshall, Plaintiff-Counter-Defendant/Appellant-Cross-Appellee, v. Vickie Lynn Marshall, Defendant-Counter-Claimant/Appellee-Cross-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
G. Eric Brunstad, Jr., Bingham McCutchen, Hartford, CT, for the plaintiff-counter-defendant/appellant-cross-appellee.
Sheila S. Kato and Kent L. Richland, Greines, Martin, Stein & Richland, Los Angeles, CA, for the defendant-counter-claimant/appellee-cross-appellant.
Appeal from the United States District Court for the Central District of California; David O. Carter, District Judge, Presiding. D.C. No. CV-01-00097-DOC.
Before: BEEZER, KLEINFELD, and PAEZ, Circuit Judges.
This appeal involves disputed claims made by Vickie Lynn Marshall, the surviving spouse of J. Howard Marshall II, against E. Pierce Marshall, the decedent's surviving son, the trustee of decedent's trust property and the executor of the estate of J. Howard Marshall II, deceased.
The surviving spouse alleges that E. Pierce Marshall tortiously interfered with an expected inter vivos gift from the decedent. Three courts — the Texas probate court, the U.S. bankruptcy court and the U.S. district court — have rendered conflicting judgments that decide the claims of the surviving spouse and that affect the distribution of the net property of the decedent's trust and probate estate.
While active probate proceedings were pending in the courts of the State of Texas, the surviving spouse filed personal bankruptcy proceedings in California. The resulting bankruptcy court proceedings and subsequent appeals to the district court resulted in the district court awarding a money judgment to Vickie Lynn Marshall for intentional interference with an inter vivos gift that she expected from the decedent. E. Pierce Marshall filed a timely appeal from the district court's money judgment. In a cross-appeal the surviving spouse seeks to reverse the district court's determination that the bankruptcy proceeding was not a core proceeding. She also attacks the amount of the damage award entered by the district court, which reduced the sum she was awarded by the bankruptcy court.
Our jurisdiction on the merits depends upon whether the probate exception to federal court jurisdiction applies to the claims initiated in the Texas probate court between the contesting claimants to the decedent's property. Incidentally we are required to determine whether the probate exception applies in a bankruptcy case.
We have appellate jurisdiction. 28 U.S.C. § 1291. We hold that all federal courts, including bankruptcy courts, are bound by the probate exception to federal court jurisdiction and that we are required to refrain from deciding state law probate matters, no matter how the issue is framed by the parties. We vacate the district court's final judgment and remand with instructions.
During his lifetime and commencing in 1982, J. Howard Marshall II conveyed and transferred most of his property under the terms and provisions of a written revocable inter vivos trust. When J. Howard Marshall II created the trust, he resided in Texas. E. Pierce Marshall and J. Howard Marshall II were initially named as co-trustees of the 1982 trust. The trust instrument expressly provided for the disposition of J. Howard Marshall II's trust property upon his death. During his lifetime, J. Howard Marshall II retained the right to receive income from the trust estate, and the trust assumed the obligation to pay the debts of J. Howard Marshall II.
In addition to property and income held in trust, J. Howard Marshall II received income and held property solely in his own name. The second wife of J. Howard Marshall II died in 1991. E. Pierce Marshall then became the primary beneficiary of the trust upon the death of J. Howard Marshall II. To a lesser extent various charities and family beneficiaries received minor trust distributions upon the death of J. Howard Marshall II.
J. Howard Marshall II met Vickie Lynn Smith in 1991. They were married on June 27, 1994. J. Howard Marshall II gave Vickie Lynn Marshall numerous inter vivos gifts of cash and personal property during his lifetime. J. Howard Marshall II did not execute any written trust, trust modification, last will and testament or conveyance in which Vickie Lynn Marshall is identified as a legatee, devisee or beneficiary, with one exception. In 1994, J. Howard Marshall II conveyed certain particularly described real property as a gift to Vickie Lynn Marshall in a separate conveyance. There is no evidence that J. Howard Marshall II authorized Vickie Lynn Marshall to participate in any capacity whatsoever with respect to Marshall business interests. There is also no evidence in the record that Vickie Lynn Marshall was a registered owner of any securities issued by Marshall corporations engaged in the petroleum industry.
J. Howard Marshall II frequently consulted his attorneys about gift taxes, estate taxes, and trust and estate matters. He considered and rejected several suggestions made by his attorneys regarding estate plans and the transfer of property to Vickie Lynn Marshall. One of J. Howard Marshall II's tax and estate attorneys drafted a letter to another of J. Howard Marshall II's attorneys with several ideas regarding provisions for Vickie Lynn Marshall. Specifically, the correspondence recommended the creation of a "catch-all" trust for the benefit of Vickie Lynn Marshall. This letter was the source of her claim that J. Howard Marshall II intended to give her an inter vivos or post mortem gift. Although it is disputed whether this proposed catch-all trust was ever created, it is admitted that J. Howard Marshall II never delivered any property in trust for the use and benefit of Vickie Lynn Marshall. No such signed trust instrument was ever produced for admission in evidence.
J. Howard Marshall II executed his last will and testament on December 22, 1992. This will contained pour-over provisions, which required the distribution of the decedent's probate property to the trustee of the 1982 trust.
The terms of the 1982 trust were modified for the last time on July 13, 1994. Although J. Howard Marshall II was married to Vickie Lynn Marshall, no provision for distributions of income or principal of the trust estate was made in favor of the settlor's spouse. The trust remained responsible for J. Howard Marshall II's debts and permitted him to borrow money using the trust's property as security.
It is contended by E. Pierce Marshall that J. Howard Marshall II made the trust provisions irrevocable as of July 13, 1994, subject to the limited power to make specified changes, such as adding a charity as a beneficiary or substituting one beneficiary for another, as long as the beneficiary that was being substituted was already a current beneficiary. After the amendment, J. Howard Marshall II could have eliminated his son, E. Pierce Marshall, as a beneficiary of the trust by substituting a charity in his place. J. Howard Marshall II could not, however, have added Vickie Lynn Marshall as a beneficiary because she was not a named beneficiary of the trust as of July 13, 1994.
The parties vigorously contested whether J. Howard Marshall II voluntarily altered his trust so it would be irrevocable or whether E. Pierce Marshall altered the trust without his father's knowledge. Vickie Lynn Marshall placed in issue the question whether J. Howard Marshall II possessed the mental capacity requisite to make any change to the terms of the trust. Our review of the trial records in the Texas probate court and in the United States district court discloses conflicting findings of fact critical to the merits of the cases of the contesting parties. The Texas probate court found that J. Howard Marshall II's 1982 trust, as amended, and his last will and testament were valid and had not been forged or altered; J. Howard Marshall II had the requisite mental capacity when he executed the 1982 trust, as amended, and his last will and testament; J. Howard Marshall II had not been the victim of fraud or undue influence; J. Howard Marshall II did not have an agreement with Vickie Lynn Marshall that he would give her one-half of all of his property; and J. Howard Marshall II did not intend to give and did not give Vickie Lynn Marshall a gift from his 1982 trust, as amended, or a bequest in his last will and testament. The United States district court made findings that E. Pierce Marshall, in concert with an attorney, "backdated documents, altered documents, destroyed documents, suborned falsified notary statements, presented documents to J. Howard [Marshall II] under false pretenses, and committed perjury," all in an effort to prevent J. Howard Marshall II from giving a gift to Vickie Lynn Marshall. The United States district court also determined that E. Pierce Marshall had tortiously interfered with Vickie Lynn Marshall's expectancy of an inter vivos gift from the decedent. The district court concluded that such conduct was actionable under Texas law.
On September 29, 1994, J. Howard Marshall II delivered gifts to Vickie Lynn Marshall valued at approximately $6 million "in consideration of her marriage to me." These gifts were memorialized in a document called the They included Compagnie Victoire,1 jewelry, title to a ranch property located in Texas, and a Mercedes Benz automobile. Vickie Lynn Marshall accepted these gifts on October 27, 1994. These gifts are all undisputed and Vickie Lynn Marshall does not contend that J. Howard Marshall II lacked the mental capacity to make these itemized gifts.2
J. Howard Marshall II died of heart failure on August 4, 1995, at the age of ninety.
The claims of Vickie Lynn Marshall that we...
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