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IN RE THOMAS AND AGNES CARVEL FOUND.

January 22, 1999

IN THE MATTER OF THE APPLICATION OF THE THOMAS AND AGNES CARVEL FOUNDATION, AS REMAINDERMAN UNDER THE LAST WILL & TESTAMENT OF THOMAS CARVEL, DECEASED, FOR A RESTRAINT ON THE TRANSFER OF CERTAIN FUNDS. IN THE MATTER OF THE APPLICATION OF THE THOMAS AND AGNES CARVEL FOUNDATION, AS REMAINDERMAN UNDER THE LAST WILL & TESTAMENT OF THOMAS CARVEL, DECEASED, FOR A RESTRAINT ON THE CONVEYANCE OR ENCUMBRANCE OF CERTAIN REAL PROPERTY BY REALITIES TRUST, A NEW YORK RESIDENT INTERVIVOS TRUST.


The opinion of the court was delivered by: Brieant, District Judge.

MEMORANDUM & ORDER

By motion filed on November 9, 1998 and heard on December 30, 1998, the petitioner, The Thomas and Agnes Carvel Foundation (the "Foundation"), moves for remand of these two removed cases to the Westchester County Surrogate's Court where they were originally filed. The Foundation argues (1) that the Court lacks diversity jurisdiction over the 98 Civ. 6283 case and that it was improperly removed by a nominal party; (2) that the Court lacks jurisdiction over both cases under Princess Lida of Thurn & Taxis v. Thompson, 305 U.S. 456, 59 S.Ct. 275, 83 L.Ed. 285 (1939), because exercising federal jurisdiction over the cases would deprive the Surrogate's Court of its control over property in its jurisdiction; and (3) that the Court, if it finds it has jurisdiction over both cases or either case, should exercise its discretion to abstain from hearing the case(s) under Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). Pamela Carvel, in her individual capacity and as personal representative to the Estate of Agnes Carvel, filed opposition papers on November 10, 1998. The Foundation filed reply papers on November 9, 1998.

BACKGROUND

Thomas Carvel ("Thomas"), a soft ice cream tycoon, died without issue on October 21, 1990, leaving his own residuary estate to the Foundation. Since that time, various parties interested in his estate ("Thomas' Estate") — including the Foundation and, until her recent death, his widow Agnes Carvel — have engaged in extensive, contentious but unresolved litigation before the Westchester County Surrogate's Court (the "Surrogate's Court") and elsewhere. One of the issues before the Surrogate's Court is the validity or enforceability of a reciprocal agreement between Thomas and Agnes to execute mirror image wills (the "Mirror Image Wills"). That agreement precludes the surviving party from "mak[ing] any gratuitous transfers of property or in any way chang[ing] the provisions of his or her will" following the death of the first to die (the "Reciprocal Agreement"). The Mirror Image Wills were executed on February 13, 1988. Each will names the Foundation to receive the entire residuary estate after the payment of general legacies, satisfaction of a provision for support of the surviving spouse, if any, and the payment of certain expenses. Thomas' will, one of the Mirror Image Wills, was admitted to probate in the Surrogate's Court on February 25, 1991. All of the general legacies and expenses have been distributed, and the Foundation has been established.

On or about August 4, 1998, Agnes died in London, England. Pamela Carvel, a niece of Thomas, was named on the death certificate as "informant", but never informed the Foundation, Agnes' living family members, or the Surrogate's Court of Agnes' death. Agnes' Guardian Ad Litem appointed by the Surrogate discovered her death and informed the Foundation on August 7, 1998. On August 11, 1998, Pamela Carvel filed in a court in the United Kingdom a purported Last Will and Testament of Agnes Carvel executed in 1995 and naming Pamela Carvel as the sole executor of Agnes' Estate (the "1995 Will"). This Will was executed in apparent violation of the Reciprocal Agreement. The officers of the Foundation believed that Agnes, at the direction of Pamela Carvel, had also made several intervivos transfers in violation of the Reciprocal Agreement.

The Foundation then filed two petitions in the Surrogate's Court, one on August 12, 1998, and one on August 14, 1998, seeking relief from that Court to preserve the subject assets within that court's jurisdiction and to prevent the transfer of funds out of Thomas' Estate or out of a particular escrow fund, and the transfer of property from the Realities Trust which Realities Trust had received from Agnes in contravention of the Reciprocal Agreement. The first such petition in Surrogate's Court (the "Funds Petition") specifically seeks to restrain the transfer of (1) the undistributed payment from the Thomas Carvel Charitable Remainder Unitrust (the "Unitrust") to Agnes (the "Unitrust Funds"); (2) approximately $2,345,348.70 transferred to Agnes under her claim of title by Chain Locations of America, Inc., which funds are currently held in escrow but previously were held in a joint account by Agnes and Pamela Carvel, allegedly in violation of the Reciprocal Agreement (the "Chain Funds"); and (3) any funds to which Agnes's Estate may be entitled pursuant to her claims against Thomas' Estate, including accumulated income (the "Estate Funds"), by any person with the power to transfer such funds. The Funds Petition therefore seeks injunctive relief against the Estate of Agnes Carvel, the five living executors of Thomas' Estate, and the trustees of the Unitrust, i.e., Adele Alexander (Unitrust trustee), Mildred Arcadipane (executor of Thomas' Estate and Unitrust trustee), Pamela Carvel (suspended executor of Thomas' Estate), Mary Ellen Cerrato (Unitrust Trustee), Robert M. Davis (suspended executor and incumbent Unitrust trustee), Betty Godley (executor of Thomas' Estate) and Herbert F. Roth (executor of Thomas' Estate). The Funds Petition also seeks a declaration of the validity of the Reciprocal Agreement, a determination that the Foundation is entitled to the subject funds, and an order awarding the subject funds to the Foundation.

The second petition, filed by the Foundation on August 14, 1998 in Surrogate's Court, seeks to restrain the transfer or encumbrance of certain real property to which the Foundation believes it is entitled (the "Real Property Petition"). The Real Property Petition seeks to restrain the transfer or encumbrance of (1) Agnes' former residence in Ardsley, New York; (2) Agnes' former residence in Atlantis, Florida; (3) a residence located at 228 Orange Tree Drive, Atlantis, Florida; and (4) a property located in Harts-dale, New York (the "Realities Properties"), all owned by Realities Trust, Inc., a New York resident intervivos trust holding title to the Realities Properties. The Real Property Petition therefore seeks injunctive relief against Pamela Carvel, in her capacity as trustee of Realities Trust. The Real Property Petition also seeks to impose a lis pendens on each of the Realities Properties, and seeks a declaration of the validity of the Reciprocal Agreement, a determination that the Foundation is entitled to the Realities Properties, and an order awarding title to the Realities Properties to the Foundation.

The Surrogate's Court issued an order to show cause and temporary restraining order with respect to each of the Petitions before they were removed. Pamela Carvel claims that the Foundation brought the Petitions before the Surrogate's Court to enforce the Reciprocal Agreement or get damages for breach of the Reciprocal Agreement, not simply to preserve assets and prevent the transfer of funds.

DISCUSSION

THE FUNDS PETITION, 98 CIV. 6283

The Foundation argues that the Court lacks diversity jurisdiction over the Funds Petition because the petitioner Foundation is a citizen of the State of New York and at least four of the defendants are citizens of the State of New York, meaning that the case lacks complete diversity. Godley (an incumbent executor of Thomas' Estate), Davis (a suspended executor and incumbent Unitrust trustee), Roth (an incumbent executor of Thomas' Estate), and Cerrato (an incumbent Unitrust trustee) are citizens of the State of New York. The Surrogate's Court recently suspended Arcadipane, another New York citizen, as executor and Unitrust trustee.

Pamela Carvel argues that all of the executors and trustees are "formal or nominal" defendants not to be considered when determining diversity jurisdiction. She claims that the only real parties in interest are herself and the Estate of Agnes Carvel because the factual background accuses Agnes Carvel of, inter alia, breaching the Reciprocal Agreement and accuses Pamela Carvel of various misdeeds, including knowing assistance of Agnes in connection with her actions in the matter.

It is true that only real and substantial interested parties are considered when determining whether diversity jurisdiction exists. Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 460-61, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980). Here, however, the executors and trustees are real parties in interest. In Rockmore v. New Jersey Fidelity & Plate Glass Ins., 65 F.2d 341, 344 (2d Cir. 1933), one of the defendants asserted that there was diversity jurisdiction because the defendant that otherwise would have destroyed diversity was a nominal party. The court rejected that contention, finding that

  [defendant] Alpha was a fiduciary having, with
  [the other defendant], possession of the `Joint
  Loss Fund' of which the contributions of [the
  other defendant] were a part, and likewise having
  responsibility for its investment and control over
  its distribution. We think Alpha was an
  indispensable party. Moreover, even if Alpha was
  not an indispensable party, it had been charged
  with obligations to invest the fund and to
  supervise its distribution. This would seem to
  have given it a personal interest in the
  controversy and to have made it more than a
  nominal or formal party. In such a situation
  diversity of citizenship must exist to confer
  jurisdiction.

Id. Like the fiduciary defendant in Rockmore, the incumbent executors of Thomas' Estate and the incumbent Unitrust trustees in this case are fiduciaries who supervise and control investment and distribution of the trust and other assets subject to the Funds Petition. The incumbent executors and Unitrust trustees are therefore real parties in interest. Because their temporary suspensions might be lifted at any time, the suspended executors are also real parties in interest.

Pamela Carvel also argues that these so-called defendants actually are aligned with the "plaintiff" Foundation and that the Foundation has named them as defendants only to avoid diversity jurisdiction. This Court rejects that argument. The incumbent executors' and Unitrust trustees' interests are at odds with the interests of the Foundation, making them properly aligned as defendants.

Our Court of Appeals uses a "collision of interests" test to determine the proper alignment of the parties. Maryland Cas. Co. v. W.R. Grace & Co., 23 F.3d 617, 622 (2d Cir. 1993). Under this test, "Courts require the existence of an actual, substantial controversy, or a collision of interests, but the conflict may in some cases concern an issue other than the so-called primary issue in dispute. This approach is more flexible because it permits courts deciding whether diversity exists to consider the multiple interests and issues involved in the litigation." Id. The Funds Petition, if granted, would restrain the incumbent executors and Unitrust trustees from transferring funds that they otherwise have the power and duty to transfer. Their interest is in fulfilling their duties and exercising their rightful powers, while the Foundation's interest is in preventing them from doing so.*fn1 In other words, the incumbent executors and Unitrust trustees have the duty sought to be enjoined. This is a collision of interests sufficient to align the Foundation on the one hand, and the executors and trustees on the other hand, on opposite sides of this case, consistent with the pleadings as filed.

Having found that the incumbent executors of Thomas' Estate and the incumbent Unitrust trustees are real parties in interest who are properly aligned as defendants for the purposes of the Funds Petition, the Court concludes that the Funds Petition, docket number 98 Civ. 6283, lacks complete diversity and must be remanded to the Westchester ...


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