Wohl v. Keene

• Decision Date: 04 April 1973
• Docket Number: No. 72-1706.,72-1706.
• Citation: 476 F.2d 171
• Parties: Jerry WOHL, sometimes known as Jerome S. Wohlmuth, et al., Appellants, v. Roslyn Wohlmuth KEENE et al., Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

476 F.2d 171 (1973)

Jerry WOHL, sometimes known as Jerome S. Wohlmuth, et al., Appellants, v. Roslyn Wohlmuth KEENE et al., Appellees.

No. 72-1706.

United States Court of Appeals, Fourth Circuit.

Argued December 6, 1972.

Decided April 4, 1973.

John M. Bader, Wilmington, Del. (Bader, Dorsey & Kreshtool, Wilmington, Del., Claude L. Callegary and Callegary, Callegary & Smith, Baltimore, Md., on brief), for appellants.

Theodore C. Mitchell, Baltimore, Md. (Paul C. Wolman, Jr., Blades & Rosenfeld, James H. Langrall, John J. Woloszyn and Weinberg & Green, Baltimore, Md., on brief), for appellees.

Before WINTER, CRAVEN and WIDENER, Circuit Judges.

WINTER, Circuit Judge:

Invoking the diversity jurisdiction of the district court, plaintiffs sought to have the court (a) grant a declaratory judgment voiding a prior decree of a Maryland equity court and voiding certain settlement agreements to which one of the plaintiffs was a party, and (b) assume jurisdiction over two trusts, remove the trustees, appoint substituted trustees, require an accounting, and grant other relief. The decree and the settlement agreements, all of which were made in 1957, purportedly settled a dispute between the parties over two testamentary trusts. Plaintiffs claimed that they should be relieved from both, because the settlement agreements and decree were procured by fraud, and those agreements and the decree violated Maryland law and the spendthrift trust provisions in the two trusts.

The district court, 340 F.Supp. 107, dismissed the complaint without prejudice to plaintiffs' rights to seek relief from a state court, holding that while it had jurisdiction to adjudicate the dispute, plaintiffs had a "plain, adequate and complete" remedy in the state equity court rendering the decree, so that the district court, in the exercise of its discretion, should "refuse to exercise its equitable powers."¹ Alternatively, and on the merits, the district court concluded that plaintiffs had not "shown" diligence in bringing suit, or alleged fraud, so as to entitle them to relief under applicable Maryland law and, moreover, that plaintiffs could not retain the benefits derived from the settlement agreements and the prior decree and still sue. Finally, the district court ruled that, in any event, suit by the minor plaintiffs was premature. As to its first ground of decision, we understand that the district court invoked the doctrine of abstention; we think it inapplicable in a case of this type. As to the alternate grounds of decision, we think the case inappropriate for summary disposition. Accordingly, we reverse the judgment of dismissal and remand the case for further proceedings.

I.

The undisputed facts are set forth in detail in the opinion of the district court and need not be restated here. It suffices to summarize by stating that plaintiff Jerry Wohl, sometimes known as Jerry Wohlmuth, was the beneficiary of certain testamentary trusts created by one of his four uncles and his father. The trusts came into being in 1937 and 1939. The trusts contained spendthrift clauses customary in Maryland in documents of this nature.² The two minor plaintiffs are the children of Jerry Wohl, and they may have a possessory interest in the trusts depending upon the occurrence of certain contingencies. The res of the trusts was primarily the testators' interests in the family clothing business originally operated by Jerry Wohl's father and his four uncles.

In 1956, Jerry Wohl sued the trustees (who were his other uncles), attacking their administration of the trusts and their operation of the family business. A state equity court assumed jurisdiction over the trusts. The litigation was ultimately settled by a series of family agreements and a consent decree of the equity court. The effect of the settlement, from the standpoint of Jerry Wohl, was that he sold his interests in the trusts, and released all claims against the trustees, for $10,000 in cash paid to him and $15,000 to be placed in a new trust to provide support for himself and his children (if he should later marry, as he subsequently did).

In the district court, Jerry Wohl attacked the prior transactions, alleging that the sale of his interests in two spendthrift trusts violated state law and was in derogation of the intent of the testators who created the trusts. He alleged also, that when he entered into the settlement he was unemployed, without funds, and in a severe state of emotional distress; that the trustees and other beneficiaries of the trusts, in breach of their fiduciary duty, "took advantage of his condition by persuading him to sell his interest in the trusts," and that he agreed to sell because of his emotional and financial state. He further alleged that defendants conspired to commit a fraud in the state equity court by willfully concealing from the court the fact that the trusts contained spendthrift provisions and that the class of contingent beneficiaries under the trusts was not closed, with the result that the state equity court lacked jurisdiction to enter the decree.

II.

That the district court's diversity jurisdiction was properly invoked was not questioned by the district court and it is not contested on appeal. As a consequence, we proceed directly to a consideration of whether, as the district court concluded, it possessed the discretion not to exercise that jurisdiction in the case at bar. We think not.

The judge-made doctrine of abstention is applicable only in special circumstances, AFA Distributing Co., Inc. v. Pearl Brewing Co., 470 F.2d 1210, 1213 (4 Cir., Jan. 3, 1973), and none of the traditional factors justifying abstention appear to be present in the case at bar.

Abstention may be appropriate where state action is being challenged in a federal court as being contrary to the federal Constitution, and resolution of state law questions might be dispositive of the case. Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941); Harrison v. NAACP, 360 U.S. 167, 79 S.Ct. 1025, 3 L.Ed.2d 1152 (1959); Reetz v. Bozanich, 397 U.S. 82, 90 S.Ct. 788, 25 L.Ed.2d 68 (1970); AFA Distributing Co. v. Pearl Brewing, supra. Abstention may also be warranted to avoid unnecessary conflict with the state in the administration of its own affairs. Burford v. Sun Oil Co., 319 U.S. 315, 63 S. Ct. 1098, 87 L.Ed. 1424 (1943); Alabama P.S.C. v. Southern Railway, 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002 (1951). AFA Distributing Co. v. Pearl, supra, 470 F.2d at 1213.

Abstention is not appropriate solely to avoid the decision of difficult state law questions. Meredith v. City of Winter Haven, 320 U.S. 228, 64 S.Ct. 7, 88 L.Ed. 9 (1943); McNeese v. Board of Ed. for Community School District, 373 U.S. 668, 673 n. 5, 83 S.Ct. 1433, 10 L.Ed.2d 622 (1963); AFA Distributing Co., Inc. v. Pearl Brewing Co., 470 F.2d 1210 (4 Cir. 1973); Martin v. State Farm Mutual Automobile Insurance Co., 375 F.2d 720 (4 Cir. 1967). See generally, Wright, Federal Courts, § 52, 2nd ed., 1970.

Although abstention may be proper when the unsettled question of state law is one which only a state tribunal could authoritatively construe, Wisconsin v. Constantineau, 400 U.S. 433, 91 S.Ct. 507, 27 L.Ed.2d 515 (1971); Crawford v. Courtney, 451 F.2d 489, 492 (4 Cir. 1971); see Lake Carrier's Assoc. v. MacMullan, 406 U.S. 498, 92 S.Ct. 1749, 32 L.Ed.2d 257 (1972), that factor is not present in the instant case. The district court's concise alternative decision on the merits, 340 F.Supp. at 113, and its citation to numerous Maryland cases demonstrates that the applicable state law does not lack certainty. See Akrotirianakis v. Burroughs, 262 F. Supp. 918, 925 (D.Md.1967) (Thomsen, C. J.).

In diversity cases where state law is relatively settled, discretion to abstain is especially limited:

The diversity jurisdiction was not conferred for the benefit of the federal courts or to serve their convenience. Its purpose was generally to afford to suitors an opportunity in such cases, at their option, to assert their rights in the federal rather than in the state courts. In the absence of some recognized public policy or defined principle guiding the exercise of the jurisdiction conferred, which would in exceptional cases warrant its non-exercise, it has from the first been deemed to be the duty of the federal courts, if their jurisdiction is properly invoked, to decide questions of state law whenever necessary to the rendition of a judgment.

Meredith v. City of Winter Haven, 320 U.S. 228, 234, 64 S.Ct. 7, 11, 88 L.Ed. 9 (1943). See also County of Alleganey v. Frank Mashuda Co., 360 U.S. 185, 79 S. Ct. 1060, 3 L.Ed.2d 1163 (1959).³ But none of the "exceptional circumstances" enumerated in Meredith, supra, 320 U.S. at 235, 64 S.Ct. 7, applies to the case at bar.

In concluding to abstain, the district court placed heavy reliance on 7 Moore, Federal Practice ¶ 60.37 3, p. 638 (2nd Ed., 1972). The apparent thrust of the citation is that if an independent state proceeding would lie to invoke the relief sought, a similar action brought instead in a federal court would be appropriate; but if a supplementary state proceeding, by motion or other pleading, is available and is "plain, adequate and complete," a federal court should abstain from exercising its equitable powers. Because the district court read Maryland Rule 625 to provide such relief by way of a supplementary proceeding in the same court that rendered the original decree, the district court declined to exercise its equitable powers.

The distinction advocated by Moore finds little support in case law. The primary case cited by Moore in its support is Griffith v. Bank of New York, 147 F. 2d 899 (2 Cir. 1945), cert. denied 325 U.S. 874, 65 S.Ct. 1414, 89 L.Ed. 1992 (1945). This was a diversity case where the district court dismissed a claim by a beneficiary of a trust against the testamentary trustee. Several state judgments in the...