Louisville Trust Company v. Smith

• Citation: 192 F. Supp. 396
• Decision Date: 02 March 1961
• Docket Number: Civ. A. No. 3218.
• Parties: LOUISVILLE TRUST COMPANY and Citizens Fidelity Bank and Trust Company, Joint Administrators with the Will Annexed of the Estate of John A. O'Brien, deceased, v. Patricia R. SMITH.
• Court: U.S. District Court — Western District of Kentucky

192 F. Supp. 396

LOUISVILLE TRUST COMPANY and Citizens Fidelity Bank and Trust Company, Joint Administrators with the Will Annexed of the Estate of John A. O'Brien, deceased, v. Patricia R. SMITH.

Civ. A. No. 3218.

United States District Court W. D. Kentucky, at Louisville.

March 2, 1961.

R. Lee Blackwell, Bullitt, Dawson & Tarrant, Irvin Marcus, Louisville, Ky., for plaintiffs.

Walter B. Smith, Louisville, Ky., for defendant.

KENT, District Judge.

This action was commenced in the Circuit Court for Jefferson County, Kentucky, Chancery Branch, First Division. It was removed to this Court by the defendant who is the widow of the decedent, John A. O'Brien. John A. O'Brien died on January 1, 1934, leaving more than one testamentary instrument. At the time of his death John A. O'Brien was one of the owners of Edward J. O'Brien & Company. There was a dispute between the defendant, the widow of John A. O'Brien, and members of the O'Brien family as to the validity of the testamentary instruments found after the death of John A. O'Brien; and a further dispute as to the value of his interest in the Edward J. O'Brien & Company; the effectiveness of an insurance trust; and other matters. After extensive negotiations a settlement agreement was entered into between the defendant and the other parties involved. As a result of such settlement the defendant received several hundreds of thousands of dollars. One year and a few months after the settlement agreement had been executed the defendant became dissatisfied and litigation was commenced. In the interim period there have been a number of lawsuits all pointed toward the determination of the issue of fraud in the settlement between the defendant and the other interested relatives and the Administrators. A list of the cases known to this Court at this time is shown below.¹

In the course of the years the defendant has used various means to disqualify the Federal Judges in Kentucky, and the writer was designated to hear the cause.

There are before us two motions: plaintiffs' motion for a summary judgment on defendant's original counterclaim, and defendant's motion to file an amended counterclaim.

In essence plaintiffs' motion for a summary judgment on the defendant's original counterclaim is based upon the theory that the defendant is barred, by the statute of limitations and by the rule of res judicata, from raising the issues presented by her original counterclaim. The original counterclaim embodies a charge of fraud against the administrators arising out of the original settlement of the rights of the estate in the Edward J. O'Brien & Company. The plaintiffs' objection to the motion for leave to file an amended counterclaim is based upon the statute of limitations and also upon the theory that this Court has no probate jurisdiction which would permit it to consider the amended counterclaim in which the defendant asserts the right to surcharge the account of the plaintiff administrators in the Estate of John A. O'Brien, deceased.

The original action by the administrators is based upon an order of the County Court of Jefferson County, Kentucky which plaintiffs claim settled their final account, creating in them a right to recover from the defendant an amount equal to the approved expenses and fees in excess of the monies in the hands of the administrators. All other funds of the estate have been previously expended in a manner which the plaintiffs claim was approved by the Jefferson County Court, or distributed to the defendant.

Reference to previous litigation will be made only when it is pertinent to the determination of the motions before the Court in this case.

Statutes of Limitations of Kentucky distinguish between different types of actions. The Administrators rely upon § 413.090 Kentucky Revised Statutes (Carroll's Ky.Stats. § 2514):

"413.090 2514 Action upon judgment, written contract or bond; fifteen year limitation. Except as provided in KRS 413.110, 413.200, 413.210, 413.220, 413.230 and 413.240, the following actions shall be commenced within fifteen years after the cause of action first accrued: * * *

"(2) An action upon a recognizance, bond or written contract.

"(3) An action upon the official bond of a * * * personal representative, guardian, committee, or trustee appointed by a court or authority of law.

"(4) An action * * * upon a bond or obligation for the payment of money or property or for the performance of any undertaking."

§ 413.160 Kentucky Revised Statutes (Carroll's Rev.Stats. § 2522):

"413.160 2522 Actions not provided for by statute; ten year limitation. An action for relief, not provided for by statute, can only be commenced within ten years after the cause of action accrued."

§ 413.120 Kentucky Revised Statutes (Carroll's Ky.Stats. §§ 2515, 2518):

"413.120 2515; 2518 Actions to be brought within five years. The following actions shall be commenced within five years after the cause of action accrued: * * *

"(7) An action for an injury to the rights of the plaintiff, not arising on contract and not otherwise enumerated. * * *

"(12) An action for relief or damages on the ground of fraud or mistake."

§ 413.130 Kentucky Revised Statutes (Carroll's Ky.Stats. §§ 2518, 2519, 2520):

"413.130 2518; 2519; 2520 When certain actions in KRS 413.120 accrue; regulations for. * *

"(3) In an action for relief or damages for fraud or mistake, referred to in sub-section (12) of KRS 413.120, the cause of action shall not be deemed to have accrued until the discovery of the fraud or mistake. However, the action shall be commenced within ten years after the time of making the contract or the perpetration of the fraud."

and § 413.230 Kentucky Revised Statutes (Carroll's Ky.Stats. § 2550):

"413.230 2550 Sureties who are discharged after five years. A surety for an executor, administrator, guardian or curator, * * * shall be discharged from all liability to a distributee, devisee or ward when five years have elapsed without suit after the cause of action accrued, and after the devisee, distributee or ward attained full age. * * *"

Thus it is necessary for the court to determine when the defendant's cause of action for the alleged fraud arose and the nature of the cause of action which she asserts. It must be obvious, from the report of the first litigation, O'Brien v. O'Brien, 294 Ky. 793, 172 S.W.2d 595; S.C. certiorari denied 321 U.S. 767, 64 S.Ct. 518, 88 L.Ed. 1063, in which the defendant pursued her claim against the O'Brien family and the administrators through the Court of Appeals of Kentucky and followed an adverse decision by that court with an application for a Writ of Certiorari to the Supreme Court of the United States, which was denied, that the defendant knew she had or could assert a claim of fraud against the plaintiffs here, at the time she instituted her original action for fraud in 1937 since she claimed fraud on the part of all parties concerned in that case. At page 609 of 172 S.W.2d, the Court of Appeals of Kentucky disposed of the plaintiff's case as follows:

"In conclusion, it has not been overlooked that the burden rested upon the plaintiff to show a failure to reveal material facts in the settlement, which is essentially to prove fraud and deceit. But the degree of proof in cases of this kind varies inversely with the knowledge of the matters involved and the trust reposed in the other by the party challenging the settlement. Thus where both parties are acquainted with the partnership affairs and neither reposed special confidence in the other, the burden of proof is greater than where one did not have full knowledge of the business and relied upon his partner. In such a case the settlement is deemed less conclusive. Chambers v. Johnston, 180 Ky. 73, 201 S. W. 488; 40 Am.Jur., Partnership, § 131. We have the peculiar situation here of innocence by the challenger of the conditions of the business who, however, had no confidence in the representations of those with whom she was dealing and who had competent and trustworthy counselors. Taking into consideration all these factors as well as the formidable ones mentioned in the beginning concerning the attitude of those with whom the plaintiff had dealt, we are of opinion there was a fair and reasonable settlement and contract of purchase and sale."

The present action was commenced in the Circuit Court for Jefferson County, Kentucky on September 13, 1956. It appears clear to this Court that any claim of fraud against the plaintiffs is barred by Kentucky Revised Statutes, § 413.120, supra, which requires actions for damages on the ground of fraud or mistake to be commenced within five years after the cause of action accrued even though § 413.130 KRS is applied, which section provides that the cause of action shall not be deemed to have accrued until the discovery of the fraud or mistake and continues inter alia:

"However, the action shall be commenced within 10 years after the time of making the contract or the perpetration of the fraud."

Since the defendant was aware of her claim of fraud in 1937 the action is barred by Kentucky Revised Statutes, § 413.160 which requires that actions not provided for by statute shall be commenced within ten years, and by § 413.090 KRS which requires actions upon official bonds to be commenced within fifteen years. Clearly, twenty years had passed from the time of Mrs. Smith's discovery of the alleged fraud to the time of the commencement of this action unless she can amend her counterclaim and surcharge the account of the administrators. She cannot sue the administrators as principals or as sureties being barred by the statutes previously cited, which allow her only five years after the cause of action accrues.

In the opinion of this Court the original counterclaim filed by the defendant is barred by the Statute of Limitations for the reasons set forth above.

In addition the plaintiffs claim that the matters complained of in the defendant...