Sianis v. Jensen

• Decision Date: 21 June 2002
• Docket Number: No. 01-2898.,01-2898.
• Citation: 294 F.3d 994
• Parties: Christopher P. SIANIS, Appellant, v. Mary S. JENSEN; Bradford K. Jensen, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

294 F.3d 994

Christopher P. SIANIS, Appellant, v. Mary S. JENSEN; Bradford K. Jensen, Appellees.

No. 01-2898.

United States Court of Appeals, Eighth Circuit.

Submitted: February 15, 2002.

Filed: June 21, 2002.

COPYRIGHT MATERIAL OMITTED

Kent J. Trembly, argued, Ithaca, NE, for appellant.

Dean F. Skokan, Jr., argued, Hooper, NE, for appellee.

Before HANSEN, Chief Judge, HEANEY and RICHARD S. ARNOLD, Circuit Judges.

HANSEN, Chief Judge.

Christopher P. Sianis brings this diversity action against his sister and her husband, Mary and Bradford Jensen, alleging that the Jensens fraudulently induced his mother, the late Mrs. Mary K. Sianis, into executing a last will and testament, as well as a trust instrument establishing the "Mary K. Sianis Revocable Trust" (Trust). The district court ruled sua sponte that Mr. Sianis's claims are barred by the doctrine of res judicata based upon an earlier Nebraska probate court order admitting Mrs. Sianis's will to informal probate. Mr. Sianis argues that the district court erred in raising res judicata upon its own motion, or in the alternative, erred in concluding that his claims are barred by res judicata. We conclude that the probate exception divests a federal court of subject matter jurisdiction to adjudicate Mr. Sianis's allegations concerning his mother's will and that the district court improperly exercised jurisdiction over that claim. We conclude, however, that the district court had jurisdiction over Mr. Sianis's challenge to the validity of the Trust and that Mr. Sianis's claim related to the Trust is not precluded by the probate of Mrs. Sianis's will.

I. Background

In April 1996, Mrs. Sianis simultaneously executed a will and a trust instrument. The trust instrument named Mrs. Jensen as trustee of the Trust and provided that, upon Mrs. Sianis's death, the trustee was to distribute 25% of the value of the Trust property to Mr. Sianis, limited to an amount not to exceed $100,000. It further provided that the remaining trust property was to be distributed to Mrs. Jensen. Mrs. Sianis thereafter transferred the majority of her property, worth approximately $430,000 to the Trust. She succumbed to cancer approximately a month after she executed her will and the trust instrument.

Mrs. Sianis's will was informally probated in a Nebraska probate court. Her entire probate estate consisted of two accounts, a brokerage account and a mutual fund account, totaling a little over $83,000. The estate was closed and liquidated in May 1997, and the two accounts devolved to the Trust pursuant to a pour-over provision in Mrs. Sianis's will, its sole distributive provision. At roughly the same time that the estate was closed, Mr. Sianis executed a release in favor of the Trust and received a distribution of approximately $88,600, representing the full amount he was entitled to under the terms of the Trust. Mr. Sianis indicated in the release that he was "not satisfied ... that [his] mother's will is in harmony with the presentments existing within the Mary K. Sianis Trust." (Appellees' App. at 18.) The remaining property held by the Trust was distributed to Mrs. Jensen.

In January 1999, Mr. Sianis filed this action, claiming that the Jensens fraudulently induced his mother into executing the will and the trust instrument. In June 2001, the district court denied the Jensens' motion for summary judgment in which they argued that Mr. Sianis essentially sought to challenge the probate of his mother's will and that the court lacked subject matter jurisdiction over such a challenge. Shortly after denying the Jensens' motion, the court issued an order notifying the parties that it was raising on its own motion the issue of whether Mr. Sianis's claims were barred by res judicata in light of the earlier probate proceeding. After a hearing on the matter, the district court agreed that Mr. Sianis's action was a disguised will contest, which should have been lodged in the Nebraska probate court, but dismissed the entire action on res judicata rather than jurisdictional grounds.

II. The Probate Exception to Diversity Jurisdiction

In support of the district court's decision to dismiss, the Jensens argue that the court should have concluded in ruling on their summary judgment motion that the probate exception deprived the court of subject matter jurisdiction over Mr. Sianis's action. The probate exception is a judicially-created limitation on federal court subject matter jurisdiction, which prohibits the exercise of jurisdiction even where, as here, all the prerequisites for diversity jurisdiction are otherwise present. See Markham v. Allen, 326 U.S. 490, 494, 66 S.Ct. 296, 90 L.Ed.2d 256 (1946). We agree that Mr. Sianis's attempt to challenge a previously probated will affects our subject matter jurisdiction and supports, at least partially, the district court's dismissal of Mr. Sianis's suit. See Green v. Ameritrade, Inc., 279 F.3d 590, 597 n. 5 (8th Cir.2002) (stating that the district court may be affirmed on any basis supported in the record). Subject matter jurisdiction is a threshold matter that we are obligated to address at the outset. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998).

The Supreme Court has long held, for historical reasons, that federal courts lack jurisdiction to probate a will or administer an estate. See, e.g., Markham, 326 U.S. at 494, 66 S.Ct. 296.¹ The Court has recognized, however, that:

[F]ederal courts of equity have jurisdiction to entertain suits in favor of creditors, legatees and heirs and other claimants against a decedent's estate to establish their claims so long as the federal court does not interfere with the probate proceedings or assume general jurisdiction of the probate or control of the property in the custody of the state court.

Id. (internal quotations omitted). The Seventh Circuit has noted that the rationale for the "probate exception is one of the most mysterious and esoteric branches of the law of federal jurisdiction." Dragan v. Miller, 679 F.2d 712, 713 (7th Cir.), cert. denied, 459 U.S. 1017, 103 S.Ct. 378, 74 L.Ed.2d 511 (1982). As a practical matter, ferreting out those instances where the exercise of federal court jurisdiction would interfere with a probate matter to such a degree to invoke the exception can be as elusive as its origin. See Charles Alan Wright & Mary Kay Kane, Federal Practice and Procedure: Federal Practice Deskbook § 27 (2002) ("The exception ... turns ... on unclear distinctions of the utmost subtlety."); Georges v. Glick, 856 F.2d 971, 973 (7th Cir.1988) ("[T]he contours of the exception are vague and indistinct."), cert. denied, 489 U.S. 1097, 109 S.Ct. 1570, 103 L.Ed.2d 936 (1989).

A. Challenge to the Will

There are two aspects to Mr. Sianis's action that are relevant to our jurisdictional inquiry. The first is Mr. Sianis's attempt to set aside his mother's will based upon the alleged fraudulent conduct of the Jensens. Although Mr. Sianis argued to the contrary before us, he informed the district court during the res judicata hearing that the court would have to set aside his mother's will if the jury found in his favor. His assertion to the district court is consistent with our understanding of the effect of his action. Our court has previously held that an unabashed assault on a previously probated will is foreclosed under the probate exception. See Krueger v. Farmers and Merchants Bank, 721 F.2d 640, 641 (8th Cir. 1983).

Krueger does not immediately foreclose Mr. Sianis's claim, however, because there are instances when a federal court may have jurisdiction to adjudicate the validity of a will. Whether that is the case depends on the remedy available to Mr. Sianis under Nebraska law. Generally, where the dispute over the will would be cognizable only in a state probate court, a federal court is deprived of jurisdiction over the contest, and the aggrieved party must pursue the action in the probate court. Rienhardt v. Kelly, 164 F.3d 1296, 1300 (10th Cir.1999); Moore v. Graybeal, 843 F.2d 706, 709 (3d Cir.1988). But if state law authorizes a suit inter partes to annul a will or to set aside the probate of a will, and the suit is enforceable in a court of general jurisdiction within the state, a federal court may entertain jurisdiction over the will contest. Id.; see also Bassler v. Arrowood, 500 F.2d 138, 141 (8th Cir. 1974) ("Where the action is clearly in personam, federal courts have the power to adjudicate the controversy."), cert. denied, 419 U.S. 1116, 95 S.Ct. 796, 42 L.Ed.2d 815 (1975). The action authorized by state law must not be incidental to, or an ancillary proceeding of, the prior probate action for federal jurisdiction to exist. Moore, 843 F.2d at 709.

Nebraska law does not authorize an inter partes action to challenge a previously probated will. Instead, a party challenging a will that has been previously probated in an informal proceeding may, pursuant to the Nebraska Probate Code, Neb.Rev.Stat. §§ 30-2201 through 30-2902, institute an action in a Nebraska probate court to contest the will, provided that the action is filed within the later of twelve months from the informal probate or three years from a decedent's death. Neb.Rev.Stat. § 30-2408; Dunmire v. Cool, 195 Neb. 247, 237 N.W.2d 636, 637-38 (1976) (explaining that a Nebraska probate court has exclusive jurisdiction over a party's claim that a decedent was fraudulently induced into changing his will). Because a challenge to a previously probated will is cognizable only in a Nebraska probate court, in a proceeding that essentially amounts to a continuation of the earlier probate proceeding, the district court lacked subject matter jurisdiction to adjudicate whether the Jensens fraudulently induced Mrs. Sianis into executing her will, and dismissal of that claim was appropriate on that ground.

B. Challenge to the Trust

The second aspect of Mr. Sianis's action...