Wohl v. Wohlmuth

• Decision Date: 21 March 1972
• Docket Number: Civ. No. 70-419.
• Citation: 340 F. Supp. 107
• Parties: Jerry WOHL, sometimes known as Jerome S. Wohlmuth, et al. v. Julius WOHLMUTH, individually, et al.
• Court: U.S. District Court — District of Maryland

340 F. Supp. 107

Jerry WOHL, sometimes known as Jerome S. Wohlmuth, et al. v. Julius WOHLMUTH, individually, et al.

Civ. No. 70-419.

United States District Court, D. Maryland.

March 21, 1972.

Claude L. Callegary, Callegary & Callegary, Baltimore, Md., and John M. Bader, Wilmington, Del., for plaintiffs.

James H. Langrall and Weinberg & Green, Baltimore, Md., for defendants Howard Wohlmuth, Alvin G. Waldman, Doris Felice Wohlmuth Hess and Sarah Wohlmuth Miller.

Paul C. Wolman, Jr., Theodore C. Mitchell and Blades & Rosenfeld, P. A., Baltimore, Md., for Julius Wohlmuth, Otto Wohlmuth, Roslyn Wohlmuth Keene and Lucille Waldman Sugar, remaining defendants.

THOMSEN, District Judge.

Jerry Wohl, for himself and as next friend of his infant children, seeks to have this court: (1) set aside on grounds of fraud a decree entered in 1957 by the Circuit Court of Baltimore City in an equity proceeding which he had instituted in that court, (2) assume jurisdiction over the trust involved in that proceeding, remove the trustees, appoint substituted trustees, require an accounting, and grant other relief. Defendants have moved to dismiss.

Undisputed Historical Facts

The facts set out in the complaint and in the documents attached to plaintiffs' brief show the following undisputed facts —

Jerry Wohl, sometimes known as Jerry Wohlmuth, is the son of the late Louis Wohlmuth, who, with his four brothers — Morris, Adolph, Julius and Otto — organized and operated a clothing business in Baltimore. They had one sister, Molvin.

Morris Wohlmuth, a bachelor, died in 1937. By his will he divided his estate, including his interest in the family business, into five parts, each of which was left to his surviving brothers as trustees, to be held in trust until the death of the last survivor of the brothers. The provisions with respect to the share of Louis (Jerry's father) are set out in note one in the margin.¹ The provisions of the other four trusts (for Adolph, Julius, Otto and Molvin, respectively) were similar.

Louis Wohlmuth died in 1939. He left surviving him his wife, Sarah, and three children: plaintiff Jerry, another son, Howard, and a daughter, Doris. By his will, Louis divided his residuary estate into two trusts, each of which was left to his surviving brothers as trustees. One trust, called Trust A, was for the benefit of his wife, Sarah, who was to and did receive the income and all of the principal thereof over a period of five years. The other trust was to continue until the death of the last survivor of his brothers. The relevant provisions of that trust are set out in note two.² Sarah, Louis' widow, is still living, as are his three children.

Both the will of Morris and the will of Louis contained customary spendthrift clauses.³

Otto is the only one of the five brothers still living. Adolph died in 1969 and Julius in 1971.

The three brothers who survived Morris and Louis continued to operate the family business and to administer the testamentary trusts until the events of 1956 and 1957. At that time Howard Wohlmuth, Jerry's brother, and Alvin Waldman, son of Jerry's aunt (Molvin), were engaged in the family business. Jerry, who was a lawyer, was not engaged in the business, but was living in Florida.

On July 27, 1956, represented by counsel, Jerry filed a bill of complaint in the Circuit Court of Baltimore City against the surviving trustees under the wills of his father (Louis) and his uncle (Morris), attacking his uncles' administration of the trusts and their operation of the family business.

On October 13, 1956, the Circuit Court of Baltimore City assumed jurisdiction over the trust estates created under the respective wills of Louis and Morris. All living persons having any interest in either estate were made parties to the case, including the then living grandchildren of Louis. Jerry's children were born after 1957.

The family problems were complicated. They included the obligation of the firm conducting the family business to repay in 1960 various sums which had been advanced in 1945 by several persons as "special capital"; the largest of those amounts was $43,036.84, advanced by Jerry's mother. Jerry's brother Howard and his cousin Alvin wanted to become partners in the business; Jerry did not, but wanted to receive some cash.

Accordingly, several agreements were prepared, particularly: (1) the so-called "Waldman Agreement", dated October 10, 1957, dealing with the trust under the will of Morris; (2) the "Family Agreement", dated October 17, 1957, dealing with the trust under the will of Louis; (3) an "Agreement of Release and Assignment", dated December 19, 1957; and (4) a proposed new "Partnership Agreement", to become effective December 31, 1957, if all of the agreements were approved by the Circuit Court.

The four agreements were presented to the late Judge Edwin Harlan, who was then presiding in the Circuit Court. In an elaborate decree, dated December 23, 1957, Judge Harlan recited that he had read and considered the original bill of complaint, the answers thereto, the intervening petition seeking the court's approval of a "family settlement" between the parties, together with the consents attached to the petition and the exhibits filed in the court. He then recited in substance the facts set out above in this opinion, together with other facts, and approved for reasons stated in the decree each of the four agreements listed above. Judge Harlan said:

"4. As an integral part of the execution and carrying out of the Family Agreement, and of the Waldman Agreement, and of the entering into of the new Partnership Agreement of December 31, 1957, the Court does now approve the arrangements between Jerome S. Wohlmuth on the one hand, and Howard Wohlmuth, Alvin Waldman, Otto Wohlmuth, Julius Wohlmuth, and Adolph Wohlmuth, on the other hand, as set forth in letters between counsel for these parties of September 11, 1957 and September 13, 1957, heretofore filed in this cause; the Court does also hereby approve, ratify and confirm the form of the said proposed Trust Agreement between the parties dated December 31, 1957; the Court further declares that the payment of $10,000.00, and the placing in trust of the $15,000.00 shall operate as a full and final payment to Jerome S. Wohlmuth for any share that he may have in the Estate of Morris Wohlmuth, as well as any share that he may have in the Estate of Louis Wohlmuth, all as is provided in detail in the said Trust Agreement. The Court holds that, in view of the uncertainties of the clothing business and the lack of confidence by Jerome Wohlmuth in that business, it is wise and reasonable, under the request made by him on the advice of his counsel, that the corpus of his interest in said estates (subject to the one contingency above mentioned) shall be converted into securities or real estate to be held for him by Trustees so as to provide support for himself and his children (if he should later marry). Accordingly, the Court approves the form of proposed Assignment and Release from Jerome Wohlmuth to Howard Wohlmuth and Alvin Waldman and the Release included therein in favor of the Trustees of the Estates of Louis Wohlmuth and Morris Wohlmuth. The Court further holds that each and all the instruments now approved in this Decree are essential and interrelated parts of the Family Agreement now ratified, approved and confirmed."

As part of the settlement approved by the Circuit Court, Jerry assigned to Howard and Alvin "each and every interest of every kind, vested or contingent, direct or indirect, in the Estate of Louis Wohlmuth and in the Estate of Morris Wohlmuth"; and in the Agreement of Release and Assignment, dated December 19, 1957, Jerry released his uncles individually and as Trustees from any injury of any kind caused to him by any act or deed theretofore performed by them.

The Agreement of Release and Assignment further stated:

"This instrument of Release and Assignment has been entered into after careful consideration by Jerome Wohlmuth himself, and with the continuous aid and assistance of his counsel. This Agreement is fully stated within the four corners of this instrument, and no collateral promises or undertakings have been made or have been attempted to be made by any of the parties hereto to be performed in addition to the undertakings hereinabove set forth."

Allegations of the Complaint

In the long complaint which he has filed in the present case, Jerry alleges that the true effect, intent and purpose of the several agreements entered into in 1957 was to deprive him of his lawful and inalienable interest in the trust estates created by the respective wills of his uncle (Morris) and his father (Louis), in violation of the Trustee's duty to prevent alienation of the trust estates according to the spendthrift trust provisions therein. He further allegs:

"26. At the time of the aforesaid transactions, plaintiff Jerry Wohl, was unemployed, without funds, and in a severe state of emotional distress. Defendants, in violation of their fiduciary duty toward said plaintiff took advantage of his condition by persuading him to sell his interest in the said trusts, as aforesaid. Said plaintiff agreed to these transactions because of his emotional and financial state as aforesaid.

"* * *

"30. That defendant Trustees by virtue of their dual position of power as general partners in de facto control of the operations of The Wohlmuth Company and as Trustees of the estates of Louis Wohlmuth and Morris Wohlmuth in The Wohlmuth Company, in committing the acts complained of herein took unconsciousable (sic) advantage of said position of trusts in order to deprive the Plaintiffs herein of their lawful interests in said Company for personal financial gain, nepotism and in order to seize full control of said Wohlmuth Company; all in patent disregard of said duties as Trustees and contrary to express testamentary instructions.

"31. In filing the

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