Rippey v. Denver United States National Bank

• Decision Date: 09 November 1966
• Docket Number: Civ. A. No. 66-C-359.
• Citation: 260 F. Supp. 704
• Parties: Bruce R. RIPPEY and A. Gordon RIPPEY, Plaintiffs, v. DENVER UNITED STATES NATIONAL BANK, a national banking association, Helen Bonfils Davis, and the Denver Post, Inc., a Colorado corporation, Defendants.
• Court: U.S. District Court — District of Colorado

260 F. Supp. 704

Bruce R. RIPPEY and A. Gordon RIPPEY, Plaintiffs, v. DENVER UNITED STATES NATIONAL BANK, a national banking association, Helen Bonfils Davis, and the Denver Post, Inc., a Colorado corporation, Defendants.

Civ. A. No. 66-C-359.

United States District Court D. Colorado.

October 26, 1966.

On Motion to Amend November 9, 1966.

Dawson, Nagel, Sherman & Howard, and Winner, Berge, Martin & Camfield, Denver, Colo., for plaintiffs.

Davis, Graham & Stubbs, and Akolt, Shepherd & Dick, Denver, Colo., for defendant Denver United States National Bank.

Holland & Hart, Denver, Colo., for defendants, Helen Bonfils Davis and The Denver Post, Inc.

MEMORANDUM OPINION AND ORDER

WILLIAM E. DOYLE, District Judge.

This case is before the Court on defendants' motions to dismiss for lack of jurisdiction over the subject matter or, in the alternative, for failure to join parties under Rule 19 of the Federal Rules of Civil Procedure. Another motion seeks dismissal for failure to allege facts sufficient to constitute a valid claim for relief.

The plaintiffs, Bruce R. Rippey and A. Gordon Rippey are residents and citizens of Maryland and Oklahoma, respectively, and are contingent beneficiaries under two testamentary trusts created under the provisions of the Will and first codicil thereto, of Agnes Reid Tammen. The defendants in the action are the Denver United States National Bank, a national banking institution, successor trustee of the Tammen Trust, Helen Bonfils Davis, a resident and citizen of Colorado, and The Denver Post, Inc., a Colorado corporation.

The complaint consists of five claims, or counts. From the allegations it would appear that the Denver United States National Bank sold 17,704.6487 shares of the capital stock of The Denver Post, Inc. to the defendant Helen Bonfils Davis, at a price which is alleged to have been $3,500,000.00 below its actual value. This stock had been held by the Bank as an asset of the Article IV Tammen Trust. It is alleged that this sale constituted a breach of the Bank's fiduciary duty as a trustee of the Tammen Trust and also that it was invalid under Sections 10(b), 17(a) and 29(b) of the Securities and Exchange Act of 1934, Title 15 U.S.C.A. §§ 78j, 78q(a) and 78cc(b) and Rule 10b-5 of the Securities and Exchange Commission, 17 C.F.R. § 240.10b-5.

The complaint also seeks relief from an amendment of the Articles of Incorporation of The Denver Post, Inc., dated July 17, 1966, which eliminated cumulative voting of stock.

After the present suit was filed the defendants instituted an action in the Probate Court of the City and County of Denver seeking instruction with respect to the administration and distribution of the trust estate and a construction of the Tammen Will and also a declaration as to the propriety of the sale of The Denver Post stock. In this Probate Court case the plaintiffs there named not only Bruce Rippey and Gordon Rippey, but also their mother, Helen Crabbs Rippey, a resident and citizen of Colorado and a lifetime income beneficiary of the Tammen Trust; Cynthia R. Catron, a resident and citizen of Colorado and the daugther of Helen Crabbs Rippey; the two minor children of Bruce R. Rippey and the two minor children of A. Gordon Rippey, together with the two minor children of Cynthia R. Catron; and the Children's Hospital Association, Inc., a Colorado corporation. In addition to the request for instructions addressed to the Probate Court, there is a claim on the part of the Denver United States National Bank that defendants Bruce R. Rippey, A. Gordon Rippey and Helen Crabbs Rippey, and perhaps some of the other beneficiaries, by filing or participating in the filing of this action, may have become absolutely barred and cut off from any share in the corpus, or income from the Tammen Trust. The allegation is that this results from Article XVII of the Tammen Will. This is a forfeiture clause, the text of which is set forth below.¹

The plaintiffs Bruce A. Rippey and A. Gordon Rippey subsequently filed Civil Action No. 66-C-419, 260 F.Supp. 717 petitioning removal of the entire case to this Court pursuant to the provisions of Title 28 U.S.C. § 1441(c). The Denver United States National Bank has moved to remand the case to the Probate Court. This motion will be considered separately.

It is to be noted that the first, second, fourth and fifth of five claims herein invoke the jurisdiction of the Court based upon diversity of citizenship. However, the third claim, together with the fourth and fifth claims, alleged federal question jurisdiction pursuant to Title 28 U.S.C. § 1331. In connection with this third claim it is contended that the Court can entertain jurisdiction over the first, second, fourth and fifth claims on a pendente basis.

No effort will be made to describe in detail the numerous and lengthy allegations of the complaint. It is necessary, however, to show their general character in order to dispose of the questions before us.

Claim One asserts that the Bank has violated its fiduciary obligations to the beneficiaries and seeks its removal as trustee together with the appointment of a successor trustee.

Claim Two incorporates the allegations of Claim One and prays that the sale be rescinded and that the defendant Bonfils be required to restore the stock to the Tammen Trust or, in the alternative, that the Court order the stock to be sold at a public sale or by sealed bids; or that the Bank, or defendant Helen Bonfils Davis, be surcharged for the difference between the fair market value of the stock on the date of its sale and the amount realized by public sale, or that there be a judgment entered surcharging the Bank for the difference between the sale price and the actual market value on the date of sale.

As indicated above, the third claim invokes the Securities and Exchange Act of 1934 and Rule 10b-5. The demand here is for a restoration of the stock to the Tammen Trust and for an order directing a public, or sealed-bid sale. Claim Four incorporates all of the allegations of the first and third claims and asserts that the defendants acted in concert to violate the fiduciary duties owed by the Bank to the plaintiffs. The fifth and final claim of the complaint concerns itself with the elimination of cumulative voting by the shareholders of The Denver Post. It is prayed that this action be voided seemingly as a fraud on the plaintiffs.

The motions to dismiss raise these points: first, that the beneficiaries who have not been joined as plaintiffs are indispensable, or so necessary that the action can not proceed in their absence and that the diversity claims must, therefore, be dismissed; secondly, it is argued that claim Three, the 10b-5 claim, is insufficient in law and thus there is not federal question jurisdiction. A corollary to this is that even if there is a valid federal question, the common law claims are not pendente to it. A further corollary matter involves the sufficiency of the contention of the plaintiffs that the diversity claims can be justified upon the basis that the plaintiffs are representatives of a class and can thus maintain the action pursuant to Rule 23 of the Rules of Civil Procedure.

I.

The primary issues is whether the action must be dismissed because of nonjoinder of parties essential to a determination of the controversy. In this connection, four of the eight nonjoined beneficiaries of the Tammen Trust are residents of Colorado. Concededly, if these beneficiaries must be joined they would have to be aligned as plaintiffs and jurisdiction based upon diversity would be defeated. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435; Knoll v. Knoll, 10 Cir., 1965, 350 F.2d 407.

The early definitive case on this subject is, of course, Shields v. Barrow, 17 Howard 130, 15 L.Ed. 158 (1854). There the Supreme Court laid down the categories determinative of this type of question. The Court distinguished between "indispensable", "necessary" and "proper" parties and held that where the parties are indispensable and their joinder would defeat jurisdiction, or where they cannot be joined for other reasons, the action can not proceed in their absence. This categorical approach to the question had been employed prior to the decision in Shields v. Barrow, but following this decision it became narrower and more restrictive and in its restricted form received wide acceptance. It was a part of the federal equity rules and was incorporated into the old Rule 19 of the Federal Rules of Civil Procedure. A wide variety of decisions resulted as to when one label or another should appropriately be applied. See Wright, Federal Courts, 260 (1963). A set formula has never evolved for determining when a particular party is indispensable. However, under the line of decisions that have followed Shields v. Barrow, persons whose rights were joint as distinguished from several, were held to be indispensable. It is pointed out in the Advisory Committee's note to Revised Rule 19 that "* * * persons holding an interest technically `joint' are not always so related to an action that it would be unwise to proceed without joining all of them, whereas persons holding an interest not technically `joint' may have this relation to an action." See Reed, Compulsory Joinder of Parties in Civil Actions, 55 Mich.Law Review 327, 356 ff., 483 (1957). The Advisory Committee also points out that the old Rule 19 created a misconception that the absence of "indispensable" parties actually resulted in the loss of jurisdiction over the persons and the subject matter before it. Citing Reed, supra, 55 Mich.Law Review, at 332-34. A further complicating factor under the old rule was its close relationship to the substantive right which required, according to many courts, careful appraisal of the nature and character of the right under appropriate state law. Revised Rule 19 is a valiant effort to eliminate the confusion which has long surrounded the old ...