Wilbur v. Keybank Nat. Ass'n

• Decision Date: 04 April 1997
• Docket Number: No. 3:96-CV-0146 AS.,3:96-CV-0146 AS.
• Citation: 962 F.Supp. 1122
• Parties: Howard WILBUR, Plaintiff, v. KEYBANK NATIONAL ASSOCIATION, and Lake City Bank, Syracuse, In., as Personal Representative of the Estate of Ernestine V. Urschel, Defendants.
• Court: U.S. District Court — Northern District of Indiana

962 F.Supp. 1122

Howard WILBUR, Plaintiff, v. KEYBANK NATIONAL ASSOCIATION, and Lake City Bank, Syracuse, In., as Personal Representative of the Estate of Ernestine V. Urschel, Defendants.

No. 3:96-CV-0146 AS.

United States District Court, N.D. Indiana, South Bend Division.

April 4, 1997.

COPYRIGHT MATERIAL OMITTED

Michael A. Dvorak, Hahn Walz Knepp Dvorak and Higgins, South Bend, IN, Lisa L. McMullen, Baker & Daniels, Indianapolis, IN, William W. Knowles, D. Brandon Johnston, Knowles and Associates, Carmel, IN, for Howard Wilbur.

Jeffery A. Johnson, May Oberfell and Lorber, South Bend, IN, for KeyBank Nat. Ass'n, State Bank of Syracuse, Syracuse, IN, Ameritrust Nat. Bank, Michiana, Society Bank Indiana and Key Trust Co., of Indiana NA.

John W. VanLaere, Jones Obenchain Ford Pankow and Lewis, South Bend, IN, James R. Howard, Syracuse, IN, for Lake City Bank, Syracuse, IN.

MEMORANDUM AND ORDER

ALLEN SHARP, Chief Judge.

On September 3, 1996, Defendants KeyBank National Corporation ("KeyBank") and Lake City Bank of Syracuse, Indiana ("Lake City Bank"), acting as personal representative for the Estate of Ernestine V. Urschel, each filed a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Defendant Lake City Bank, in the alternative to moving for summary judgment, also filed a motion for abstention, requesting that this abstain from exercising its jurisdiction pending a final determination of a claim filed by the plaintiff, Howard Wilbur, against the Estate of Ernestine V. Urschel in the courts of the State of Indiana. Since both motions for summary judgment relate to similar issues, the court will address the merits of both motions in this memorandum and order.

I. FACTUAL BACKGROUND

In December 1982, Emily Vance ("Vance") executed her Last Will and Testament. Through this Will, Ms. Vance created a testamentary trust which provided that her assets would be held in trust for the benefit of her daughter, Ernestine Urschel ("Urschel"), and her brother, the plaintiff, Howard Wilbur ("Wilbur"). According to the language of the trust, Urschel was to receive the income from the trust assets for her life. In addition, the trust also provided that the trustee, the State Bank of Syracuse ("State Bank"),¹ could pay Urschel amounts out of the corpus of the trust if the trustee, in its sole discretion, deemed it necessary for her maintenance and support.

Vance died in 1983. After her funeral, Wilbur went to speak with Mr. James Caskey, the president and trust officer for the State Bank. At this short meeting, Mr. Caskey allegedly informed Wilbur that the bank was not obligated to provide him with any advice or information with regard to Vance's testamentary trust while Urschel, the income beneficiary, was still living. Relying on this conversation, Wilbur did not contact the trustee to inquire about the status of his remainder interest in the Vance trust at any time during its administration.

According to the terms of Vance's Will, the State Bank administered the testamentary trust. As a result, Urschel began receiving monthly interest checks from the trust. In late 1984 and early 1985, Urschel and her attorney twice contacted the trustee, the State Bank, through Mr. Caskey, seeking additional payments from the trust.² In support of these requests, Urschel's attorney provided the State Bank with an itemization of Urschel's monthly expenses. When Urschel's expenses were set off against her social security check (the sole income she claimed to be receiving), she alleged a monthly shortfall of $1,288.00. Consequently, Urschel requested that the State Bank use its discretionary power to invade the corpus of the trust for her maintenance and support.

Ultimately, the State Bank approved Urschel's requests. Consequently, the trustee issued to Urschel a one-time payment of $1,500.00 in order to allow her to pay any outstanding bills. In addition, in March 1985, Urschel began receiving monthly payments of $1,200 from the trust.³ These payments were later increased to $1,500.00 per month. By October 1988, the corpus of the trust had been exhausted due to the trustee's monthly payments to Urschel. According to the record, the State Bank did not inform Mr. Wilbur that Urschel was receiving payments from the corpus of the trust or that his remainder interest was terminated by the exhaustion of the trust for Urschel's benefit.

In August 1991, due to Urschel's physical condition, Lake City Bank was appointed as the conservator over Urschel's assets. In December 1991, Lake City Bank filed a report with the state court which set forth the assets owned by Urschel at the outset of the conservatorship. The conservator's report contained an itemization of the income received and expenses incurred by Urschel for the period of August 5 through October 2, 1991, and indicated that Urschel possessed a great deal of money in the form of United States Savings Bonds and other bank accounts located in Warsaw, Indiana. According to the report, the savings bonds and accounts held funds in excess of $340,000.00. The conservator's report did not list Vance's trust as an asset since it had been exhausted in 1988.

Sometime in 1991, Mr. Wilbur became aware of the existence of Urschel's conservatorship, including the fact that Urschel owned bonds and cash assets of substantial value. However, Wilbur made no inquiries of the conservator, Lake City Bank, or the trustee, the State Bank, regarding the status of his remainder interest in Vance's testamentary trust.

On June 22, 1995, Ernestine Urschel died. Her estate is being administered by Lake City Bank. At the time of her death, Urschel still possessed assets in excess of $300,000.00. Upon learning of Urschel's death, Mr. Wilbur's daughter, Lenore Shaffer, on her father's behalf, contacted KeyBank (which was now the successor-in-interest to the State Bank) to determine the status of her father's remainder interest. On August 9, 1995, Mr. George Freese, then the Senior Vice President of Key Trust Company of Indiana, sent Wilbur a letter explaining that the trust had been terminated in 1988 after the corpus had been exhausted for Urschel's benefit. This letter was the first and last communication that Wilbur received from the trustee of Vance's testamentary trust with regard to his remainder interest. Consequently, Wilbur filed a claim against the Estate of Ernestine Urschel, contending that the trust was improperly administered and that his remainder interest squandered. Mr. Wilbur's claim against the estate is still pending in the Kosciusko County Superior Court under cause number 43D01-9506-ES-22.

II. PROCEDURAL BACKGROUND

On February 29, 1996, Mr. Wilbur, by counsel, filed the present cause of action in this court, which has subject matter jurisdiction over this cause pursuant to 28 U.S.C. § 1332.⁴ In his complaint, Wilbur raises two claims: (1) a breach of trust claim against KeyBank, the successor-in-interest to the trustee of Vance's testamentary trust; and (2) a constructive fraud claim against Lake City Bank, the administrator of Ernestine Urschel's estate. Mr. Wilbur requests that this court impose a constructive trust upon the assets of the Estate of Ernestine Urschel in the amount of the corpus that would have been distributed to him but for Urschel's alleged fraud.

The defendants have both filed motions for summary judgment in this action.⁵ Defendant Lake City Bank filed its brief in support of its motion for summary judgment September 3, 1996. In its brief, Lake City Bank argues that Wilbur filed his claim of constructive fraud outside of the six-year statute of limitations under Indiana law. In addition Lake City Bank also raises the equitable defense of laches to bar the plaintiff's claim. In the alternative, Lake City Bank requests that this court abstain from exercising its jurisdiction over the plaintiff's case since Wilbur's claim against the Estate of Ernestine Urschel is still pending in the Kosciusko County Superior Court. The plaintiff responded to defendant Lake City Bank's motion for summary judgment on November 12, 1996.

Defendant KeyBank filed its motion for summary judgment on September 3, 1996, as well. KeyBank also raises the statute of limitations as a defense, arguing that the plaintiff's complaint was filed after the applicable two-year statute of limitations had run on the plaintiff's breach of trust claim. KeyBank also asserts that judgment as a matter of law should be granted in its favor under the equitable doctrine of laches. The plaintiff filed his response to KeyBank's summary judgment motion on November 12, 1996.⁶ In the interests of clarity, the court will address the two motions for summary judgment individually.

III. SUMMARY JUDGMENT STANDARD

Summary judgment is proper if the pleadings, depositions, answers to interrogatories and admissions on file, together with any affidavits, show that there exists no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56; Russo v. Health, Welfare & Pension Fund, Local 705, 984 F.2d 762 (7th Cir.1993). A thorough discussion of Rule 56 can be found in a trilogy of cases decided in 1986 by the Supreme Court of the United States. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Celotex addressed the initial burdens of the parties under Rule 56, and Anderson addressed the standards under which the record is to be analyzed within the structure of Rule 56.

The initial burden is on the moving party to demonstrate, with or without supporting affidavits, the absence of a genuine issue of material fact and that judgment as a matter of law should be granted in the moving party's favor. Celotex...