Janecek et al v. Janecek, No. 2:2013cv00287 - Document 50 (E.D. Wash. 2014)
Court Description: ORDER DENYING MOTION TO REMAND, INTER ALIA denying 46 Motion to Remand Signed by Senior Judge Lonny R. Suko. (VR, Courtroom Deputy)
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Janecek et al v. Janecek Doc. 50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON In re: JAY T. JANECEK, co-trustee/beneficiary, and JILL J. (JANECEK) COBB, co-trustee/beneficiary and the JANECEK TRUST, a Washington express trust and the JANECEK CHILDREN’S TRUST, a Washington express trust, ) ) ) ) ) ) ) ) ) Petitioners, ) ) ) v. ) ) JON J. JANECEK, ) co-trustee/beneficiary ) ) Respondent. ) ______________________________ ) NO. CV-13-287-LRS ORDER DENYING MOTION TO REMAND, INTER ALIA BEFORE THE COURT is the Petitioners’ Motion To Remand (ECF No. 46). On its own motion, the court hears the Motion To Remand on an expedited basis without oral argument. SUBJECT MATTER JURISDICTION The jurisdictional argument presented in the Motion To Remand has already been presented by Petitioners in their response to Respondent’s Motion For Appointment of Third-Party Corporate Trustee (ECF No. 19), and Respondent has filed a reply which addresses Petitioners’ argument that this court lacks subject matter jurisdiction. Moreover, the court has an independent 28 ORDER DENYING MOTION TO REMAND, INTER ALIA- 1 Dockets.Justia.com 1 obligation to examine whether subject matter jurisdiction exists before deciding 2 any issue on the merits, Valdez v. Allstate Ins. Co., 372 F.3d 1115, 1116 (9th 3 Cir. 2004), and the absence of federal subject matter jurisdiction may be raised 4 at anytime. Rains v. Criterion Systems, Inc., 80 F.3d 339, 342 (9th Cir. 1996). 5 This TEDRA (Trust and Estates Dispute Resolution Act) petition, RCW 6 Chapter 11.96A, was removed by Respondent from Spokane County Superior 7 Court on August 21, 2013. It was removed on the basis of federal diversity 8 jurisdiction. The “Notice of Removal” (ECF No. 1 at p. 3) asserts the amount 9 in controversy exceeds $75,000 and there is complete diversity of citizenship 10 because Petitioners Jay T. Janecek and Jill L. (Janecek) Cobb are residents and 11 citizens of Washington and Idaho, respectively, and Respondent Jon J. Janecek 12 is a resident and citizen of California. The “Notice of Removal” further 13 asserts: 14 15 16 17 T]he trust-related tort claims (breach of fiduciary duty), trustrelated accounting demands, and property issues (California real property issues and requests for disgorgement of trust funds), alleged herein do not fall under the “probate exception” to this Court’s exercise of jurisdiction because they do not relate to the probate of a will, administration of an estate, or property that is in the custody of a probate court. 18 Petitioners contend the “probate exception” applies. This exception 19 provides that a federal court may not probate a will, administer an estate or 20 entertain an action that would interfere with pending probate proceedings in 21 state court or with the control of property in custody of the state court. 22 Markham v. Allen, 326 U.S. 490, 494, 66 S.Ct. 296 (1946). In Marshall v. 23 Marshall, 547 U.S. 293, 126 S.Ct. 1735, 1748-49 (2006), the Supreme Court 24 articulated a simple test of whether a case fits within the probate exception: 25 whether a plaintiff seeks an in personam judgment against a defendant, as 26 opposed to the probate or annulment of a will or other relief seeking to reach a 27 res in the custody of a state court, and whether sound policy considerations, 28 ORDER DENYING MOTION TO REMAND, INTER ALIA- 2 1 specifically, the special proficiency of state courts with respect to the issues 2 presented by a case, militate in favor of extending the probate exception to that 3 case. In Marshall, the Court specifically held that a claim based on a “widely 4 recognized tort” such as tortious interference with an expectancy of an 5 inheritance or gift is outside the exception. Id. at 1748. 6 Petitioners cite to certain deposition testimony of Respondent Jon J. 7 Janecek as indicating the dispute regarding the trusts is inextricably intertwined 8 with the probate of the estate of Lionell Janecek and therefore, this court’s 9 entertaining of that dispute would interfere with the pending probate 10 proceedings in Spokane County Superior Court, or with the control of property 11 in the custody of that court. The following colloquy occurred during the 12 deposition of Jon J. Janecek: 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Q: Would you agree that marshaling the trust asserts, dividing by three equal ways is the resolution to this action? A: Actually, sir, they’re combined. It’s a . . . pour over will. So frankly, even the stuff that goes into the probate by virtue of the will is automatically going to the trust. So it’s all combined, sir. It’s a unified trust and estate issue, wills and trust issue. So they’re all combined. Frankly, the probate is supposed to send to the trust because the trust is the sole beneficiary under the will. So it’s all combined. (ECF No. 39-11 at pp. 46-47). This court does not believe the mere existence of a pour over will deprives it of subject matter jurisdiction to adjudicate the parties’ dispute regarding the trusts. It does not appear this court’s adjudication of the dispute would interfere with the probate proceedings in Spokane County Superior Court or with control of property in the custody of that court. None of the relief sought by Petitioners appears to have anything to do with estate assets. Rather, Petitioners seek relief only with regard to trust assets: 1) order 28 ORDER DENYING MOTION TO REMAND, INTER ALIA- 3 1 compelling Respondent to provide complete and full accounting of the 2 Children’s Trust; 2) order compelling Respondent to provide complete and full 3 accounting of the Janecek (Family) Trust; 3) order compelling Respondent to 4 disgorge all assets under his control that belong to the Children’s Trust; 4) 5 order compelling Respondent to disgorge all assets under his control that 6 belong to the Janecek (Family) Trust; 5) order finding that Petitioners are not 7 required to respond to a Payoff Demand Statement under California law, and 8 prohibiting Respondent from enforcing such a demand; and 6) order 9 compelling Respondent to provide a full and complete accounting of all 10 payments claimed to have been made in full or partial satisfaction of the 11 Promissory Note regarding the Seal Beach house, including canceled checks 12 showing all payment. (Ex. A to ECF No. 1 at p. 12). 13 Petitioners do not seek a judgment out of estate property. Rather, 14 Petitioners seek an in personam judgment against Respondent. Petitioners are 15 akin to tort claimants seeking a declaration that Respondent has breached his 16 fiduciary duties with regard to the trusts and that Petitioners should be granted 17 the injunctive and declaratory relief they seek in order to remedy that breach. 18 Breach of fiduciary duty imposes liability in tort. Miller v. U.S. Bank of 19 Washington, N.A., 72 Wn.App. 416, 426, 865 P.2d 536 (1994). Many courts 20 have held that a claim for breach of fiduciary duty is outside the probate 21 exception. Curtis v. Brunsting, 704 F.3d 406, 409-10 (5th Cir. 2013); Campi v. 22 Chirco Trust UDT, 223 Fed. Appx. 584, 585 (9th Cir. 2007); Lefkowitz v. Bank 23 of New York City, 528 F.3d 102, 107-08 (2nd Cir. 2007); Jones v. Brennan, 465 24 F.3d 304, 307-08 (7th Cir. 2006); and Hamilton v. Nielsen, 678 F.2d 709, 710 25 (7th Cir. 1982). In Lefkowitz, for example, the probate exception barred federal 26 jurisdiction over a beneficiary’s claims against the executor of her parents’ 27 estate to obtain assets that remained under the control of the state probate court, 28 ORDER DENYING MOTION TO REMAND, INTER ALIA- 4 1 but it did not bar her tort claims against the executor for fraud and breach of 2 fiduciary duty which did not directly implicate the assets of the probate estate 3 and were not entirely intertwined with issues of estate administration. 4 Assuming there is a pour over will, that means once the probate in 5 Spokane County Superior Court is completed, the estate assets will be “poured 6 over” into the trust(s) and then subject to any orders this federal court has made 7 regarding management of trust assets. That does not, however, fall within the 8 probate exception and deprive this court of subject matter jurisdiction. Once 9 the assets are “poured over,” they will no longer be estate assets in custody of 10 the state court. The probate court will settle how the estate assets are to be 11 distributed per the terms of Lionell Janecek’s will. This court will have 12 nothing to do with that. Its orders will only impact the assets after they have 13 been “poured over” into the trusts.1 To the extent, however, there is any impact 14 upon assets currently in the custody of the probate court, this does not 15 necessarily warrant application of the probate exception. 16 The probate exception incorporates the doctrine of custodia legis, “the 17 general principle that, when one court is exercising in rem jurisdiction over a 18 res, a second court will not assume in rem jurisdiction over the same res.” 19 Marshall, 547 U.S. at 311-12. This principle is narrow, however, and “has no 20 application to a case in federal court based upon diversity of citizenship, 21 wherein the plaintiff seeks merely an adjudication of his right or his 22 23 24 25 26 27 1 Petitioners represent the estate has not been closed only because Lionell Janecek owned 25% of a real estate partnership that owned two vacant lots in Tacoma, and that the proposed closing date was February 7, 2014. (ECF No. 36 at p. 5). It is possible then that there currently is no ongoing probate proceeding in Spokane County Superior Court. 28 ORDER DENYING MOTION TO REMAND, INTER ALIA- 5 1 interest as a basis of a claim against a fund in the possession of a state 2 court . . . .” Princess Lida v. Thompson, 305 U.S. 456, 466, 59 S.Ct. 275 3 (1939)(emphasis added). This was reiterated by the Supreme Court in 4 Markham and quoted by the Court again in Marshall: [W]hile a federal court may not exercise its jurisdiction to disturb or affect the possession of property in the custody of a state court, . . . it may exercise its jurisdiction to adjudicate rights in such property where the final judgment does not undertake to interfere with the state court’s possession save to the extent the state court is bound by the judgment to recognize the right adjudicated by the federal court. 5 6 7 8 9 Marshall, 547 U.S. at 310 (quoting Markham, 326 U.S. at 494)(emphasis 10 added). See also F.T.C. v. J.K. Publ’ns, Inc., 2009 WL 997421 at *3 (C.D. Cal. 11 2009)(“[A] federal court properly adjudicates rights regarding property that is 12 the subject of a probate proceeding so long as the federal court does not order 13 the transfer of any property belonging to the probate estate”). Here, Petitioners 14 do not ask this court to order the transfer of any property belonging to the 15 probate estate; at most, they ask this court to adjudicate their rights and the 16 rights of Respondent regarding property that is the subject of the Spokane 17 County probate proceeding. Petitioners also assert there is no diversity of citizenship because 18 19 Respondent should be treated as a resident of Washington due to the fact he is a 20 legal representative of Lionell Janecek’s estate, and Lionell Janecek was a 21 resident of Washington.2 28 U.S.C. §1332(c)(2) provides that “the legal 22 representative of the estate of a decedent shall be deemed to be a citizen only of 23 the same State as the decedent . . . .” This argument is essentially 24 indistinguishable from Petitioners’ argument that the probate exception to 25 26 27 2 All three of the siblings, Petitioners and Respondent, are co-personal representatives of the estate. They are also the sole beneficiaries of the estate. 28 ORDER DENYING MOTION TO REMAND, INTER ALIA- 6 1 federal jurisdiction applies because of the existence of a pour over will. 2 Because that exception does not apply, however, the only relevant 3 consideration is Respondent’s capacity as a trustee. In actions by or against a 4 trustee, diversity is determined by the trustee’s own domicile. Whereas a 5 trustee is the legal owner of trust property, an executor is not the legal owner of 6 estate property, but merely a representative of the estate. See Andrews v. 7 Modell, 636 F.Supp.2d 213, 220-22 (S.D. N.Y. 2008). Respondent is a citizen 8 of California for the purpose of this TEDRA lawsuit and therefore, there is 9 complete diversity between him and the Petitioners. The Supplemental Declaration of Jay T. Janecek (ECF No. 45) suggests 10 11 $75,000 may not be in controversy with regard to the trusts. This is the first 12 time Petitioners have called the jurisdictional amount into question. 13 Respondent, in his opening memorandum regarding his motion to appoint a 14 third-party corporate trustee, indicates the Janecek (Family) Trust currently 15 holds approximately $1,500,000 in assets and that the probate action in 16 Spokane County Superior Court involves approximately $1,000,000 in assets. 17 (ECF No. 19 at p. 3).3 In their response memorandum, the Petitioners do not 18 specifically take issue with the jurisdictional amount and indeed, state: “The 19 total amount of combined assets exceeds $2,000,000. The value of personal 20 property is approximately $3,600.00. The vast majority of trust assets are held 21 in securities at Merrill Lynch and DA Davidson.” (ECF No. 36 at p. 3). It is 22 unclear if “combined assets” means combined trust assets or combined trust 23 and probate assets. 24 25 26 27 3 According to Petitioners, the Janecek (Family) Trust is actually comprised of three trusts: (a) Credit Shelter Trust; (b) Marital Trust; and (c) Survivor’s Trust. (ECF No. 36 at p. 2, n. 1). 28 ORDER DENYING MOTION TO REMAND, INTER ALIA- 7 Based on the information currently before it, this court concludes the 1 2 probate exception does not apply and that it has subject matter jurisdiction to 3 adjudicate the parties’ dispute regarding the trusts. Petitioners’ Motion To 4 Remand (ECF No. 46) is DENIED. 5 6 MEDIATION On August 16, 2013, Petitioners filed in this court a “Notice Of 7 8 Mediation Under RCW 11.96A.300.” (ECF No. 3). RCW 11.96A.300(1) 9 provides that: “A party may cause the matter to be subject to mediation by 10 service of written notice of mediation on all parties or the parties’ virtual 11 representatives as follows.” The matter is to be resolved using mediation 12 procedures unless a petition objecting to mediation is filed within twenty days. 13 RCW 11.96.300(2)(b). The record does not indicate that Respondent ever filed 14 a petition objecting to mediation. In fact, Petitioners’ “Notice Of Mediation 15 Under RCW 11.96A.300" represents that “[t]he parties previously mutually 16 agreed through counsel that attorney Peter Witherspoon (WSB #7956) will be 17 appointed as mediator.” Within ten (10) days of the date of this order, the parties shall serve 18 19 and file statements showing cause why the court should not compel them to 20 engage in the mediation procedure set forth in RCW 11.96A.300. 21 If the court does not compel mediation, it will promptly decide 22 Respondent’s Motion For Appointment Of Third-Party Corporate Trustee (ECF 23 No. 19). If mediation is compelled, the court will await the outcome of the 24 mediation before ruling on the motion. 25 // 26 // 27 // 28 ORDER DENYING MOTION TO REMAND, INTER ALIA- 8 1 2 3 IT IS SO ORDERED. The District Executive is directed to enter this order and forward copies to counsel. DATED this 4th of March, 2014. 4 5 6 7 s/Lonny R. Suko LONNY R. SUKO Senior United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ORDER DENYING MOTION TO REMAND, INTER ALIA- 9
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