Williams v. Security Nat. Bank of Sioux City, Ia.
| Decision Date | 06 November 2003 |
| Docket Number | No. C 03-4034-MWB.,C 03-4034-MWB. |
| Citation | 293 F.Supp.2d 958 |
| Parties | John Franklin WILLIAMS, Peter Martin Williams, and James Oliver Williams, Plaintiffs, v. SECURITY NATIONAL BANK OF SIOUX CITY, IOWA, Defendant-Counterclaimant, v. John Franklin Williams, Peter Martin Williams, and James Oliver Williams, Counter-Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Dana A Dwiggins, Lionel, Sawyer & Collins, Las Vegas, NV, Jay Elliott Denne, Stanley E Munger, Munger, Reinschmidt & Denne, Sioux City, IA, Mark A Solomon, Lionel, Sawyer & Collins, Las Vegas, NV, for plaintiff.
Glianny Fagundo-Toro, Michael P Bruyere, Lord, Bissell & Brook, Atlanta, GA Maurice B Nieland, Rawlings Neiland Probasco Killinger Ellwanger Jacobs, et al, Sioux City, IA, for Defendant.
TABLE OF CONTENTS
I. INTRODUCTION .................................................960
A. Factual Background .......................................960
B. Procedural Background.....................................963
II. LEGAL ANALYSIS ..............................................965
A. Standards For A Motion To Dismiss ........................965
B. Nature Of The Claims And Counterclaims ...................967
C. Breach Of Contract .......................................968
1. Arguments of the parties...............................968
2. Pleading of the claim .................................969
D. Fraud ....................................................971
1. Arguments of the parties ..............................971
2. Pleading of the claim .................................971
E. Conspiracy ...............................................972
III. CONCLUSION .................................................973
Are the defendant's counterclaims for breach of contract, fraud, and conspiracy viable, or are they contradicted by the very documents upon which they are premised? That is the question in this litigation involving remainder beneficiaries' claims that the trustee of a trust mismanaged the assets of the trust. The trustee contends, and has premised its counterclaims on the contention, that the remainder beneficiaries specifically authorized and directed the trustee to take the actions regarding holding certain closely-held family corporation investments and not otherwise diversifying the assets of the trust about which the remainder beneficiaries now complain. The remainder beneficiaries, however, contend that the trustee's counterclaims fail to state claims upon which relief can be granted, because the documents submitted by the trustee in support of the counterclaims show that the remainder beneficiaries never gave the alleged authorizations or directions.
On a motion to dismiss, the court must assume that all facts alleged in the plaintiff's complaint are true, and must liberally construe those allegations. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In this case, where the motion to dismiss attacks counterclaims, the facts that must be taken as true are, therefore, the facts alleged in the Answer and Counterclaims. Thus, the following factual background is drawn primarily from defendant Security National Bank's Answer and Counterclaims, supplemented where necessary, for appropriate context, by factual allegations from the plaintiffs' Complaint, and exhibits attached to either the Answer and Counterclaims or the Complaint.1 However, the court will not recount here all of the parties' factual allegations, but only sufficient of them to put in context the present motion to dismiss counterclaims.
On August 16, 1982, Dorothy Pritchard Williams established a trust, later amended on February 29, 1984, which the court, like the parties, will describe as the DPW Trust. At times pertinent to this litigation, Security National Bank (SNB) was a co-trustee of the DPW Trust. Upon Dorothy Williams's death in 1984, Charles Williams became the life income beneficiary of the trust. Plaintiffs John, Peter, and James Williams are the remainder beneficiaries of the DPW Trust. Therefore, the plaintiffs will be described collectively as the Remainder Beneficiaries.
The parties agree that part of the investment portfolio of the DPW Trust consisted of stock in closely-held Pritchard family corporations, identified as Pritchard Investment Corporation (PICO), Pritchard Associates, and Roanoke Realty Company.2 In 1989, SNB took note of the fact that these assets were closely held and that stock in them was not widely traded or easily marketable. See Answer and Counterclaims, Exhibit A. Consequently, a trust officer of SNB sent a letter dated August 3, 1989, to co-trustee John Pritchard asking him to sign a copy of the letter to indicate "if [he] want[ed] to continue to hold the above listed assets in the [DPW Trust]." See id.3 John Pritchard signed a copy of the letter on August 14, 1989, indicating his desire that the DPW Trust continue to hold the assets in the closely-held family corporations. Also on August 14, 1989, John Pritchard wrote the SNB trust officer a letter indicating, in pertinent part, that "[o]ur families do wish to retain the `closely-held family investments' such as Pritchard Associates, Pritchard Investment Company, and the old Roanoke Realty Corporation...." Answer and Counterclaims, Exhibit B (emphasis in the original). That letter also acknowledged that SNB would "exclude the value of these particular assets from the trust when calculating the basis for [SNB's] management fee." Id.
Shortly thereafter, the SNB trust officer sent a letter, dated September 15, 1989, to remainder beneficiaries James Oliver Williams and John Franklin Williams, the body of which stated the following:
We would like to follow up on a proposal initiated sometime ago by Chuck Williams, and recently approved by John Pritchard. Our period reviews of the investments in this account have always had a problem with the closely-held family investments—Pritchard Investment Company, Pritchard Associates, and Plaza West Associates. We would like to propose that all of the beneficiaries of this account join Chuck Williams and John Pritchard in directing us to hold these assets. In return, we would exempt the market values of those assets from calculation of our principal fee.
Let me explain what this step would mean. As Co-Trustee with John Pritchard, Security National Bank currently shares investment responsibility for Pritchard Investment Company, Pritchard Associates, and Plaza West Associates. Part of that responsibility is to monitor those investments in a timely way and in terms of their investment quality. That is very difficult for us to do at this time, because they are closely-held family interests and information is not readily available on them. We understand that the decision to hold these assets is based largely on family considerations and is not purely an investment decision, so we would suggest that the family join together in directing us to hold them and relieve us of our responsibility for monitoring those investments. If you would like to join in the direction to hold these assets, and to relieve the Security National Bank of any responsibility for them, please countersign the enclosed copy of this letter and return it to me in the envelope provided. If you have any questions about this move, please feel free to give me a call at (712) 277-6727. Exempting these assets from fee considerations would mean a savings of approximately $1,500 a year in principal fees.
Answer and Counterclaims, Exhibits C & D. James Oliver Williams and John Franklin Williams signed and returned copies of this letter. Id. Peter Martin Williams signed and returned a copy of a similar letter dated December 19, 1989. See Answer and Counterclaims, Exhibit E.4
The "General Allegations" upon which SNB's counterclaims are based are the following:
5.
On or before August 14, 1989, Counterclaim Defendants informed John Pritchard, Co-Trustee of the DPW Trust, that they wanted SNB to maintain the investments in closely-held family corporations, rather than diversify the DPW Trust's investment portfolio by purchasing stock of widely-traded, easily marketable companies. See August 3, 1989 and August 14, 1989 letters exchanged between SNB and John Pritchard attached hereto as Exhibits A and B.
6.
On or about September 15, 1989, Counterclaim Defendants James Oliver Williams and John Franklin Williams individually entered into a contract with SNB wherein they directed SNB not to diversify the DPW Trust investment portfolio and [to] keep the investments in closely-held family corporations. As consideration for the contract, SNB agreed to exempt the market values of those assets from calculation of SNB's principal fee. See contracts attached hereto as Exhibits C and D.
7.
On January 18, 1990, Counterclaim Defendant Peter Martin Williams entered into a contract with SNB wherein he directed SNB not to diversify the DPW Trust investment portfolio and [to] keep the investments in closely-held family corporations. As consideration for the contract, SNB agreed to exempt the market values of those assets from calculation of SNB's principal fee. See contract attached hereto as Exhibit E.
8.
After receiving the executed contracts, SNB justifiably relied on the statements contained therein and in the contracts' validity by maintaining certain investments in closely-held family corporations and not further diversifying the DPW Trust's investment portfolio.
Answer and Counterclaims, ¶¶ 5-9.
When Charles Williams died on May 7, 2002, John, Peter, and James Williams allege that they became entitled to distribution of the remainder of the Trust. This lawsuit involves claims by these Remainder Beneficiaries against SNB for its purported mismanagement of the DPW Trust over the last...
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