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Priscilla Alden Beach v. Rome Trust Co.

decided: August 17, 1959.

PRISCILLA ALDEN BEACH, PLAINTIFF-APPELLANT,
v.
ROME TRUST COMPANY, A DOMESTIC CORPORATION, AND JOHNSON D. MCMAHON, AND ROBERT BEACH, ADMINISTRATOR CTA OF THE GOODS AND CHATTELS OF ESTATE OF CARRIE A. BEACH, DECEASED, DEFENDANTS-APPELLEES. PRISCILLA ALDEN BEACH, PLAINTIFF-APPELLANT, V. J. MAYNARD JONES, SURROGATE OF ONEIDA COUNTY, STATE OF NEW YORK; ROME TRUST COMPANY, A NEW YORK BANKING & TRUST COMPANY; JOHNSON D. MCMAHON, INDIVIDUALLY AND AS VICE-PRESIDENT OF ROME TRUST COMPANY; DIRECTOR OF BEACH LUMBER COMPANY, A NEW YORK CORPORATION; COUNSEL FOR ROME TRUST COMPANY; COUNSEL FOR BEACH LUMBER COMPANY; COUNSEL FOR ESTATE OF CARRIE A. BEACH, DECEASED; COUNSEL FOR ROBERT BEACH; COUNSEL FOR ESTATE OF SAMUEL H. BEACH, JR.; ROBERT BEACH, INDIVIDUALLY AND AS EXECUTOR OF ESTATE OF SAMUEL H. BEACH, JR., DEFENDANTS-APPELLEES.



Author: Lumbard

Before LUMBARD, Circuit Judge, and GALSTON and ANDERSON, District Judges.

LUMBARD, Circuit Judge.

These appeals are from orders of James T. Foley, J., in the District Court for the Northern District of New York declining jurisdiction in favor of the Surrogate's Court of Oneida County, New York, in a diversity action brought by the beneficiary of a testamentary trust which was created out of an estate then and now in the course of administration in the Surrogate's Court, against the administrator C.T.A., a testamentary trustee under letters of trusteeship issued by the Surrogate, and an attorney alleged to have participated with them in certain breaches of trust. In the first action Judge Foley declined jurisdiction. The second action was brought for an injunction against proceedings for an accounting in the Surrogate's Court, subsequently commenced by defendants, and the cause was dismissed for the reasons which governed the first disposition.

We hold that as to those claims the prosecution of which would constitute an interference with the previously attached quasi in rem jurisdiction of the Surrogate's Court the district court's order of dismissal was correct; but that insofar as the plaintiff's claims would not interfere with such a prior jurisdiction, it was improper either to dismiss them, or to retain them and then abstain from the exercise of jurisdiction. We hold further that for the reasons set forth at length in Sullivan v. Title Guarantee & Trust Co., 2 Cir., 1948, 167 F.2d 393, Judge Foley correctly declined to enjoin the subsequently initiated proceedings in the Surrogate's Court.

The facts alleged in the complaint and taken as true for present purposes, are briefly as follows. Plaintiff's father, Samuel H. Beach, Sr., died testate in 1941 leaving a will which made his wife, Carrie A. Beach, the sole heir and distributee of his estate, but which, in provisions that would have been effective had Carrie predeceased Samuel, manifested an intention that the two children of Carrie and Samuel, the plaintiff, Priscilla Alden Beach, and Samuel H. Beach, Jr., share equally in the estate. Carrie Beach died on November 15, 1951 leaving a will which, according to the complaint, purported to carry out the wishes of Samuel, and therefore to divide the estate equally between Priscilla and Samuel, Jr. The will of Carrie, which is annexed to the complaint, provided in terms for outright gifts of personalty and realty to Samuel, Jr., for a gift in trust to Priscilla for life of common stock in the Beach Lumber Co. and one-half the residue of the estate, and for an absolute gift of the remaining one-half of the residue to Samuel, Jr. Under the terms of the trust the issue of Priscilla are remaindermen, but in default of such issue, Samuel, Jr. or his issue are designated. Under the terms of the trust the designated trustee, the Rome Trust Company, was instructed to vote the Beach Lumber Co. common stock "only as directed by my son, Samuel H. Beach, Jr.," and was expressly given the power to retain investments held at the death of the testatrix and to invest the corpus without restriction to investments legal for trust funds in the State of New York.

Upon the death of Carrie, Samuel, Jr. became the administrator C.T.A. of her estate under the terms of the will which was admitted to probate February 26, 1952, and in 1953 the Rome Trust Company assumed its duties as trustee, receiving, amongst other securities, the common stock of Beach Lumber Co. Very shortly thereafter Samuel, Jr., died, and Robert J. Beach, his son, was named his administrator C.T.A., as well as administrator C.T.A. of Carrie's estate. None of the several fiduciaries thus involved with the assets of the estate of Carrie have as yet rendered an accounting despite plaintiff's demands that they do so. Plaintiff has received income in the amount of $1,500 per year from the trustee.

Johnson D. McMahon was counsel to Carrie Beach, and to Samuel Beach, Jr., and is presently counsel to and a director and vice-president of the Rome Trust Company, as well as counsel to and a director of the Beach Lumber Company. Robert J. Beach has succeeded his father as president of the Beach Lumber Company, and holds all the stock of the company which is not in the trust.

The correctness of the decision below necessarily turns upon the nature of the claims asserted in the complaint, and accordingly we now consider them in some detail. The complaint, which, as the district court noted, is very loosely drawn, alleges five causes of action against various combinations of defendants. The first cause of action seeks an accounting of the estate and of the trust to determine whether the trustee in fact received the proper portion of the residue, it being alleged on information and belief that the total estate of Carrie was in the neighborhood of $300,000. Plaintiff in part derives this figure from the fact that the estate of Samuel, Jr. was valued at about $200,000. She apparently asserts that the trust estate should be about equal to this sum, although it is not alleged that Samuel, Jr. was without other income, and it appears from affirmative allegations that he served actively as chief officer of Beach Lumber Company. While the complaint refers to plaintiff as if she were the legal and equitable owner of one-half of the Carrie estate, there is no allegation that she is anything other than a life beneficiary of the trust established by the will. Plaintiff sets forth her income from the trust as $1,500 per year, and alleges that as against the supposed corpus, presumably $150,000, her income reveals a corpus of only $25,000, at 6%.

The second cause of action alleges a breach of trust in the retention by the trustee of the stock of Beach Lumber after the death of Samuel, Jr., since he could then no longer supervise the voting of it, and since the investment, as measured by its yield to the plaintiff, and the apparently small increase in the net worth of the company over the relevant years, was a poor and therefore an improper one. Although in this cause of action there are vague assertions that there was a concert of action between Robert Beach, Rome Trust Company, and McMahon, the only relief sought is (1) damages against the Rome Trust Company for breach of trust in the wrongful retention of the stock and in failing to account earlier, such damages to be ascertained by an accounting of the past and present value of the investment; and (2) removal of the Rome Trust Company as trustee.

The third cause of action is confusingly stated, but it appears to be alleged that plaintiff has been the legal owner of the stock of the Beach Lumber Company held by the trust since the death of Samuel, Jr., and that plaintiff should be declared legal and equitable owner. Whether this result is asserted to derive from a construction of the will itself, or to be the equitable relief appropriate to the breaches of the trust alleged, is not plain. It is however elsewhere generally alleged that McMahon, as counsel to Carrie and Samuel, Jr., so prevailed upon them as to have prevented them from vesting the plaintiff with an outright one-half interest which they and Samuel, Sr. intended that she have.

The fourth cause appears to depend on the third, in that it is claimed that the retention of the stock by the Rome Trust Company rendered it a constructive trustee for plaintiff's benefit; but the relief demanded is damages in the amount of $250,000.

Finally, the plaintiff alleges a conspiracy between the several defendants led by McMahon to prevent the Beach Lumber Company from paying dividends and thereby to deprive the plaintiff of benefits under the trust. Although it is alleged as a conclusion that McMahon's behavior was fraudulent, all that is detailed is that he participated with or gave advice to several persons or companies whose positions vis-a-vis the plaintiff are adverse and thus aided in a breach of the trust duties of the testamentary fiduciary.

In a summary of te relief sought plaintiff demands an accounting of the estates of Samuel, Sr. and Carrie Beach and of the Beach Lumber Company; removal of Rome Trust Company as trustee, and damages from it for breach of trust; adjudication of and declaration of title to the Beach Lumber shares and an order turning them over to plaintiff; damages against McMahon as co-conspirator with the Rome Trust Company; and such other and further relief as is proper.

We turn now to consideration of the primary issue presented whether the district court properly declined to take jurisdiction of the controversy presented despite the presence of the requisite allegations ...


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