Storm, Brion M. v. Storm, Robert Z. ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-3078
BRION M. STORM,
Plaintiff-Appellant,
v.
ROBERT Z. STORM,
Defendant-Appellee.
____________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 02-C-219—David F. Hamilton, Judge.
____________
ARGUED FEBRUARY 27, 2003—DECIDED MAY 13, 2003
____________
Before KANNE, DIANE P. WOOD and EVANS, Circuit
Judges.
KANNE, Circuit Judge. The facts of this family inheri-
tance dispute center around the role Robert Z. Storm had,
if any, in persuading his mother Evelyn Storm, to change
the terms of her will and revocable trust. In 1993, Evelyn
executed a revocable trust agreement, creating the Evelyn
F. Storm Trust, into which she transferred a significant
amount of her property. At that time, the terms of the
trust provided in part that her son Robert would receive
$20,000 from her estate upon her death, while her grandson
Brion M. Storm would receive various items of personal
property as well as one-half of the residue of her estate.
Despite various amendments to the original trust agree-
2 No. 02-3078
ment, until January 2000 Brion continued to be listed as
a beneficiary entitled to one-half of the residue.
In late 1999, Evelyn suffered a serious stroke, and in
December of that year, Robert moved her from Illinois to
his home in Indianapolis, Indiana. After the move, Evelyn
made several changes to her testamentary documents: on
January 18, 2000, approximately six weeks after she was
moved to Indianapolis, Evelyn executed a new will and a
new trust agreement, which no longer included Brion as a
beneficiary. On October 31, 2000, Evelyn once again exe-
cuted a new will and an amendment to the trust, naming
Robert as the sole beneficiary of her estate. Evelyn died
on March 14, 2001.
On February 7, 2002, Brion filed this complaint as a
diversity action under 28 U.S.C. § 1332. He alleged that
before December 1999, he had a significant inheritance
expectancy under the terms of Evelyn’s trust. He further
contended that sometime in 2000, Robert exerted undue
influence on his mother Evelyn, causing her to execute
a new will and a new trust naming Robert the sole ben-
eficiary of her estate, thus tortiously interfering with
Brion’s inheritance expectancy.
Robert moved to dismiss Brion’s complaint under Federal
Rule of Civil Procedure 12(b)(1), arguing that the district
court lacked subject matter jurisdiction over the claim,
as this was essentially a probate matter. The district
court granted Robert’s motion to dismiss, finding that
Brion’s lawsuit “is so closely related to a probate proceed-
ing as to fall within the probate exception” to federal
jurisdiction. Storm v. Storm, No. IP 02-219-C H/K, 2002
U.S. Dist. LEXIS 14732, at *2 (S.D. Ind. July 15, 2002). We
agree that jurisdiction here is lacking, and affirm the
dismissal of Brion’s claims.
No. 02-3078 3
ANALYSIS
We review a district court’s decision to dismiss a com-
plaint for lack of subject matter jurisdiction de novo.1 Iddir
v. INS, 301 F.3d 492, 496 (7th Cir. 2002). For purposes
of our review, we accept as true the well-pleaded factual
allegations in the plaintiff’s complaint, drawing all reason-
able inferences in favor of the plaintiff. Id.We begin with the well-established rule that “a federal
court has no jurisdiction to probate a will or administer
1
The parties dispute the appropriate standard of review. Robert
argues that our review is only for an abuse of discretion by the
district court, citing language from our decision in Loyd v. Loyd,
731 F.2d 393, 397 (7th Cir. 1984) (“[W]e will treat the case on the
basis of the particular facts here as involving an exercise of
discretion and hold that there was no abuse of that discretion. In
candor, if the district court had found originally that the probate
exception was applicable, we doubt we would have faulted him.”)
and Rice v. Rice Found., 610 F.2d 471, 477 (7th Cir. 1979) (“Even
where a particular probate-like case is found to be outside the
scope of the probate exception, the district court may, in its
discretion, decline to exercise its jurisdiction.”).
In this case, the district court found that it was without
jurisdiction to hear this lawsuit—that is a conclusion quite
different from finding jurisdiction exists but declining to exercise
it (an abstention case like that referred to in Rice). Review of
abstention decisions presents a different matter from the review
of determinations that subject matter jurisdiction does not exist
at all. To the extent that Loyd speaks of discretion, we believe
that language is best characterized as expressing a certain
deference to the district court’s greater familiarity with a par-
ticular State’s probate law and court system, as well as an
acknowledgment that the probate exception is not clearly delin-
eated nor “a hard and fast jurisdictional rule.” Loyd, 731 F.2d
at 397. Because the existence of subject matter jurisdiction goes
to the ultimate question of whether the federal courts have the
power to entertain and decide a case, we emphasize that our
review in such situations is de novo.
4 No. 02-3078
an estate.” Markham v. Allen, 326 U.S. 490, 494 (1946);
see also Dragan v. Miller, 679 F.2d 712, 713 (7th Cir. 1982).
Under the so-called “probate exception,” even when the
requirements of diversity jurisdiction have been met—the
parties are diverse and the amount in controversy exceeds
the jurisdictional threshold, see 28 U.S.C. § 1332(a)(1)
(2003)—a federal court nonetheless lacks jurisdiction over
cases involving probate matters. This jurisdictional excep-
tion, entirely the creation of the courts, was originally
justified on historical grounds. See Dragan, 679 F.2d at
713; Rice v. Rice Found., 610 F.2d 471, 475 & n.6 (1979).
Since its earliest invocations in the courts of this coun-
try, see Farrell v. O’Brien, 199 U.S. 89, 101-10 (1905)
(discussing several early cases to have considered the
question of federal jurisdiction over probate matters), the
exception has become an established feature of our fed-
eral judicial system.
This Court has noted that the precise contours of the
probate exception have not been—nor really can be—clearly
defined. See Georges v. Glick, 856 F.2d 971, 973 (7th Cir.
1988); Loyd v. Loyd, 731 F.2d 393, 397 (7th Cir. 1984). The
exception is rather easily applied to “pure” probate
matters—i.e., those involving the administration of an
estate or the actual probate of a will. Rice, 610 F.2d at
475. Where difficulties arise is in determining whether
certain matters beyond “pure” probate issues are none-
theless “ancillary” to the core probate activities to such a
degree that they too fall within the exception. See Dragan,
679 F.2d at 715; see also Farrell, 199 U.S. at 110 (finding
that a federal court lacked jurisdiction over a suit to set
aside the probate of a will “when the remedy to set aside
afforded by the state law is a mere continuation of the
probate proceeding, that is to say, merely a method of
procedure ancillary to the original probate, allowed by the
state law for the purpose of giving to the probate its
ultimate and final effect” (emphasis added)).
No. 02-3078 5
Thus, as we stated in Dragan, the process of determining
whether a state-law action should fall within the probate
exception involves the concept of “ancillarity,” which itself
“is an invitation to apply a concept—here the concept
of probate—pragmatically.” Dragan, 679 F.2d at 715. This
means that “labels” should not be a dispositive factor in
our analysis. Id. at 716-17. Rather, in Dragan, we ad-
opted a “practical approach” to determining the bound-
aries of the probate exception. Id. at 715. We directed
courts to consider the policy goals underlying the excep-
tion to determine whether the court had jurisdiction over
a particular case—that is, a suit is considered ancillary
to a probate proceeding, and thus within the exception,
if “allowing it to be maintained in federal court would
impair the policies served by the [exception].” Id. at 715-
716. We have also cautioned that the probate exception,
as a judicially created exception to the statutory grant
of diversity jurisdiction, should be construed narrowly.
See Georges, 856 F.2d at 973 (citing Rice, 610 F.2d at 475).
In Dragan and subsequent cases, we identified several
practical bases for the exception. One practical reason for
excluding probate matters from federal jurisdiction, albeit
not the strongest one, is to encourage legal certainty—
that is, to ensure that the outcomes of probate disputes
will be consistent by limiting their litigation to one court
system, rather than providing disputants the choice
between two. Dragan, 679 F.2d at 714. A second goal
is to promote judicial economy. Id. The process of deter-
mining and effectuating a decedent’s testamentary wishes
will generally begin in a state court. “If the probate pro-
ceeding thus must begin in state court, the interest in
judicial economy argues for keeping it there until it is
concluded.” Id. “By restricting probate matters and will
contests to state courts, questions as to a will’s validity
can be resolved concurrently with the task of estate ad-
ministration.” Georges, 856 F.2d at 974. This serves to
6 No. 02-3078
preserve the resources of both the federal and state judi-
cial systems and avoids the piecemeal or haphazard res-
olution of all matters surrounding the disposition of the
decedent’s wishes.
We have referred to “relative expertness” as another
practical reason for the exception. Dragan, 679 F.2d at
715. Because state courts have nearly exclusive jurisdic-
tion over probate matters, state judges vested with probate
jurisdiction develop a greater familiarity with such legal
issues. A final practical reason for having an exception is
to avoid unnecessary interference with the state system
of probate law. Georges, 856 F.2d at 974. This reason is
actually a consequence of the other rationales: if state
courts have the exclusive task of probating a will, and
thus develop the relative expertise to do so (includ-
ing the expertise to deal with all matters ancillary to
probate), then federal court resolution of such matters is
unlikely to be more than an unnecessary interference
with the state system.
This case does not involve the administration of an
estate, the probate of a will, or any other “pure” probate
matter. The question for this Court then is whether the
action brought by Brion should be considered ancillary to
a probate proceeding, thus depriving the federal courts
of jurisdiction. The district court found that this lawsuit
was in “substance and effect” a will contest, and as such
was ancillary to a probate proceeding and covered by the
probate exception. Storm, 2002 U.S. Dist. LEXIS 14732,
at *10, *19-20. Brion essentially raises two arguments as
to why the exception is nevertheless inapplicable. First,
he contends that this is a tort action rather than a will
contest. Second, he argues that this case involves the terms
of a trust rather than a will.
At bottom, the first issue Brion faces is whether his
complaint, though framed in terms of the state law tort
No. 02-3078 7
of interference with an inheritance expectancy, is in sub-
stance a will contest, and thus properly considered an
action ancillary to pure probate proceedings. Wrongful
interference with an inheritance expectancy is a rec-
ognized tort in Indiana; such an action may be brought
in a court of general jurisdiction, provided a will contest
is unavailable to supply an adequate remedy. Minton v.
Sackett, 671 N.E.2d 160, 162-63 (Ind. Ct. App. 1996); see
also RESTATEMENT (SECOND) OF TORTS § 774B (1979). But
as we have just observed, mere labels—whether an action
is styled as a tort action or will contest—are not decisive
in our probate-exception analysis.
We note that what Brion seeks is a legal determination
that the terms of Evelyn’s final will and trust, executed
in October 2000, are invalid because they were allegedly
procured through the exertion of undue influence by
Robert. Brion claims that the change in the terms of the
will and trust worked to his detriment by frustrating his
established inheritance expectancy. He therefore seeks
damages, presumably to be measured in part by what
he would have received had Evelyn’s actual testamentary
wishes, as expressed in the previous will and trust, gov-
erned the disposition of her assets (he also seeks exemplary
or punitive damages). While Brion phrases his action as
one involving tortious interference with his inheritance
expectancy, the practical effect of his lawsuit would be
similar to that of a successful will contest: the terms of
the final, allegedly invalid testamentary instruments
would essentially be bypassed, while Brion would receive,
as damages, the assets he would have otherwise been
entitled to under what he says are Evelyn’s actual will
and trust. Cf. Dragan, 679 F.2d at 716 (noting that a
lawsuit seeking the imposition of a constructive trust
would, if successful, cause an estate to pass through the
intestacy statue—thus, “this is not the form of the action
but would be its practical effect if it succeeded” (emphasis
added)).
8 No. 02-3078
An examination of the practical reasons for having a
probate exception demonstrate that Brion’s tort action
is simply an attempt to “call[ ] a will contest an action in
tort.” Id. at 717. As such, we agree with the district court
that this case belongs in state court.
Granted, the fact that no will has yet been admitted to
probate and thus no state-court probate proceedings
have been initiated2 weighs against dismissal in order to
conserve judicial resources or avoid interference with
ongoing proceedings. But dismissal is nonetheless appro-
priate here because Indiana law would require that
Brion’s tort claim be heard in the probate division of the
Marion Superior Court, a state court which hears tes-
tamentary disputes more often than any federal court. See
Storm, 2002 U.S. Dist. LEXIS 14732, at *16-17.3 The
2
In addition to the trust, Evelyn left a will, but it is unclear
whether or when that will would be submitted for probate in the
Indiana courts. The district court noted that it had no informa-
tion as to the future disposition of the will or estate. Storm,
2002 U.S. Dist. LEXIS 14732, at *5. We simply note that if this
will is admitted to probate at some future time, the claim raised
by Brion in this lawsuit would more appropriately be included
as part of those proceedings, thus implicating both the judicial
economy and the unnecessary interference policy rationales.
3
The district court determined that:
In the state courts, Brion’s claim would be heard by the
Probate Division of the Marion Superior Court, which has
both general and specialized jurisdiction. See Ind. Code §§ 33-
5.1-2-4 and -2-9. The Superior Court is a court of general
jurisdiction, including probate matters, Ind. Code § 33-5.1-2-
4(2), but Indiana statutes plainly establish a specialized
jurisdiction for the Superior Court’s Probate Division. The
legislature instructed the Marion Superior Court to adopt
rules of the court dividing the work of the court among
divisions, including a Probate Division. Ind. Code § 33-5.1-2-
(continued...)
No. 02-3078 9
district court noted that this case would “present precisely
the sorts of issues that would arise in a will contest.” Id.
at *14. Given that federal courts rarely, if ever, deal with
such matters, and that the Indiana state courts are
vastly more familiar with the factual and legal issues
involved, dismissal in this case is consistent with the
policy behind the probate exception.
Brion argues that Indiana does not have a state policy
of channeling probate or probate-like cases into spe-
cialized courts, as the State has vested jurisdiction over
probate matters in the state courts of general jurisdiction.
He acknowledges that Marion County, Indiana has a
Probate Division as part of the superior court system, but
he suggests that this Court has said that such internal
divisions of a court of general jurisdiction should have
no bearing on our analysis:
[The State of Illinois] has abolished separate probate
courts and vested the probate jurisdiction in its courts
of general jurisdiction, the circuit courts. The Cook
County circuit court has subdivided itself into divi-
sions, one of which is the probate division; but this
organizational refinement has no jurisdictional sig-
nificance. “Since both the probate division and the law
division are . . . simply divisions of the same constitu-
tional court of general jurisdiction, it follows neces-
3
(...continued)
9(c). Indiana statutes give the Probate Division jurisdiction
over issues of trusts as well as wills. Ind Code § 30-4-6-1
(“Jurisdiction in this state for all matters arising under this
article [Trust Code] shall be with the court exercising probate
jurisdiction.”). That probate jurisdiction includes the power
to rescind or reform a trust. Ind. Code § 30-4-3-25. Thus,
Indiana law would assign Brion’s claims to the Probate
Division of the Marion Superior Court.
Storm, 2002 U.S. Dist. LEXIS 14732, at *16-17.
10 No. 02-3078
sarily that both of these tribunals could have had
equal and concurrent subject matter jurisdiction over
the [matter at issue].”
. . . [R]etention of federal diversity jurisdiction over
such cases will not interfere with the state policy
of channeling all probate matters to specialized courts.
Hamilton v. Nielsen, 678 F.2d 709, 710 (7th Cir. 1982)
(citations omitted) (quoting Alfaro v. Meagher, 326 N.E.2d
545, 548-59 (Ill. App. Ct. 1975)). Brion cites another case
in which we affirmed federal jurisdiction, where we
noted that the district court “was impressed that probate
matters in Indiana are relegated to courts of general
jurisdiction rather than to a specialized probate court.”
Loyd, 731 F.2d at 397.
Brion suggests that this language indicates that the
district court was wrong to find that this factor weighed
in favor of dismissal, because even if his case would be
referred to the probate division of the Marion Superior
Court, that is merely an internal division of a court of
general jurisdiction. We think Brion misreads our empha-
sis in Hamilton. In that case, we affirmed federal court
jurisdiction over a lawsuit in which a will beneficiary
sought an award of money damages from the executors
of the will for alleged negligence in the management of
the estate. Hamilton, 678 F.2d at 710. Important to our
analysis in that case was the fact that probate of the will
in state court had essentially concluded and the federal
suit did “not involve the validity or construction of the
will or seek to change the distribution of the assets of the
estate decreed by the circuit court.” Id. In determining
whether the case came within the probate exception, we
emphasized that no probate-like issues were involved—
those issues had previously been determined by the Illi-
nois state court and were not challenged in the federal
suit. Given that, the fact that Illinois no longer had legisla-
No. 02-3078 11
tively mandated, specialized probate courts had “no juris-
dictional significance” to our analysis. We continue to
believe that the organizational divisions of courts of gen-
eral jurisdiction (like that of the Marion Superior Court)
have “no jurisdictional significance” for federal courts
when no probate-like issues are involved.
When probate-like matters are at issue in a dispute,
however, we reiterate that it is significant to our analy-
sis that state courts vested with probate jurisdiction are
much more familiar than are federal courts with the
factual and legal issues involved. Indeed, in Hamilton,
this Court went on to assert that, “This is not to say, of
course, that federal courts can now probate wills in Illi-
nois because the state has abolished its specialized pro-
bate courts. Probate remains a peculiarly local function
which federal courts are ill equipped to perform.” Id. This
tort action is, for practical purposes, closely related to a
will contest, and thus ancillary to a pure probate case.
Because this case raises probate-like issues, it falls
within the probate exception despite its characterization
as a tort suit.
Brion also argues that the probate exception is inap-
plicable to this case because the dispute involves an inter
vivos trust, which includes specific provisions for the
disposition of the trust res upon Evelyn’s death, rather
than a will. As the district court noted, had Brion alleged
that Robert exerted undue influence on Evelyn that
caused her to modify the terms of her will, rather than the
terms of her trust, dismissal would have been the clear
result. Storm, 2002 U.S. Dist. LEXIS 14732, at *10-11. But
that is not the case here—and we must determine wheth-
er the use of a trust to convey testamentary wishes,
rather than a will, requires a different result.
This Court has previously refused to adopt a per se rule
making the probate exception inapplicable when the
12 No. 02-3078
testamentary instrument at issue is a trust rather than
a will. Georges, 856 F.2d at 974 n.2. In Georges, we said
that “[t]he inter vivos trust [at issue in the case] is clearly
a will substitute. However, the fact that this case does
involve a will substitute does not automatically render
the probate exception applicable.” Id. (citing Dragan, 679
F.2d at 715). Instead, we turn again to our practical
approach, looking to the policies underlying the probate
exception, to determine if Brion’s lawsuit belongs in
state court. For the same reasons that the exception ap-
plies to this suit despite its characterization as a tort
action, we believe the exception applies despite this
being a dispute over the terms of an inter vivos trust
rather than a traditional will.
Given the growth in recent years of various “will substi-
tutes,” we are loath to throw open the doors of the fed-
eral courts to disputes over testamentary intent simply
because a decedent chose to use a will substitute rather
than a traditional will to dispose of his or her estate. We
believe that our practical approach to determining wheth-
er the probate exception to diversity jurisdiction applies
is an appropriate means by which to judge whether dis-
putes surrounding such will substitutes should be within
the jurisdiction of the federal courts.
CONCLUSION
Because we agree with the district court that “[a]s
a practical matter, this case is indistinguishable from a
will contest,” Storm, 2002 U.S. Dist. LEXIS 14732, at *14,
we find that the probate exception applies despite the
characterization of this case as a tort action and despite
the use of an inter vivos trust rather than a traditional
will. Dismissal of the action for lack of subject matter
jurisdiction is therefore AFFIRMED.
No. 02-3078 13
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—5-13-03