The opinion of the court was delivered by: DAVIS
The plaintiff, a citizen of Virginia, is the beneficiary of two trusts established under the terms of the will of his late grandfather. He has presently a 1/12 interest in the income and a 1/3 contingent remainder interest in the corpus. The defendants are the trustees of both trusts. One of the trusts, the J. H. Zerbey Newspaper Trust, has as its principal asset Five Thousand Nine Hundred and Sixty (5960) out of a total of Six Thousand (6000) shares of stock of J. H. Zerbey Newspapers. The defendant Uzal H. Martz, is president and treasurer as well as a director of this Corporation. The plaintiff contends that the directors have been voting themselves substantial gratuitous bonuses at the end of each year, and that the amount of the bonuses exceeded $20,000 in 1965 and has exceeded $150,000 over the years. The plaintiff alleges that the trustees, who control the corporation and at least one of whom is an officer and director, have full knowledge of these payments and have given their consent to them although the trustees have refused to give him any information about them. Moreover, he avers that the trustees have made fraudulent accountings to the Orphans' Court of Schuylkill County, Pennsylvania in failing to disclose that these bonuses were being paid.
The plaintiff is suing the trustees for the portion of the bonuses denied to him as a life tenant of the trust or in the alternative for whatever relief the court deems equitable and proper.
The defendants contend that this court lacks jurisdiction over the subject matter because the action involves a probate matter within the exclusive jurisdiction of the Orphans' Court of Schuylkill County.
It is now well settled that the federal courts have no jurisdiction to probate a will or to administer an estate since the equity power conferred by the Judiciary Act of 1789 and its successors included only that power held by the English Chancery Court in 1789 and this did not extend to probate or estate matters. Markham v. Allen, 326 U.S. 490, 66 S. Ct. 296, 90 L. Ed. 256 (1946); Broderick's Will, 88 U.S. (21 Wall.) 503, 22 L. Ed. 599 (1874). Nevertheless, the federal courts have jurisdiction
"to entertain suits 'in favor of creditors, legatees and heirs' and other claimants against a decedent's estate 'to establish their claims' so long as the federal court does not interfere with the probate proceedings or assume general jurisdiction of the probate or control of the property in the custody of the state court." Markham v. Allen, supra, 326 U.S. at 494, 66 S. Ct. at 298.
Similarly, the Supreme Court has stated that where the action is strictly "in personam" rather than "in rem," "quasi in rem," or related solely to "administration and restoration of corpus," the federal courts have power to adjudicate the controversy. Princess Lida v. Thompson, 305 U.S. 456, 466-467, 59 S. Ct. 275, 83 L. Ed. 285 (1939). See Vestal & Foster, "Implied Limitations on the Diversity Jurisdiction of Federal courts," 41 Minn.L.Rev. 1, 13-23 (1956); Note, "Federal Jurisdiction in Matters Relating To Probate and Administration," 43 Harv.L.Rev. 462 (1930).
The problem that exists here is one of deciding on which side of the line this case falls, for the Supreme Court has not been altogether clear or consistent in applying its rules. A review of some of its decisions will be helpful.
In Payne v. Hook, 74 U.S. (7 Wall.) 425, 19 L. Ed. 260 (1868), the plaintiff brought suit in the federal court against the administrator of her brother's estate to obtain her distributive share. She contended that the administrator was guilty of gross misconduct, and made false statements to the State Probate Court, had withheld a true inventory of decedent's property, and had obtained a receipt from plaintiff by fraudulent means. The Supreme Court upheld the jurisdiction of the federal courts, stating "that a court of chancery, as an incident to its power to enforce trusts, and make those holding a fiduciary relation account, has jurisdiction to compel executors and administrators to account and distribute the assets in their hands." Payne v. Hook, supra at 431.
In Hayes v. Pratt, 147 U.S. 557, 13 S. Ct. 503, 37 L. Ed. 279 (1893), a testator had established a testamentary trust, the purpose of which was to establish a home for aged and infirm mechanics. His will named two trustees and two successor trustees. When the two original trustees had died, the property passed by the terms of the will to Pratt, one of the successor trustees. However, the son of one of the original trustees had secured an appointment by the New Jersey Orphans' Court as trustee over part of the assets, but had not applied them for the purpose directed by the testator. Pratt sued him in federal court to account for the assets and to require him to turn them over to him for administration. Again the Supreme Court held that the federal courts had jurisdiction over the matter.
The Supreme Court found that the lower court had erroneously assumed jurisdiction in Byers v. McAuley, 149 U.S. 608, 13 S. Ct. 906, 37 L. Ed. 867 (1893). There the federal court had taken complete control of the administration of an estate. The opinion distinguished Payne v. Hook, supra on the ground that in the latter the court made no attempt to take possession of the estate assets, settle the claims of the citizens of the state inter se or administer the estate, "but simply acted to establish and enforce, in behalf of a citizen of another state, her claim to a share of the estate." Byers v. McAuley, supra at 617, 13 S. Ct. at 909. See also Farrell v. O'Brien, 199 U.S. 89, 25 S. Ct. 727, 50 L. Ed. 101 (1905); Ellis v. Davis, 109 U.S. 485, 27 L. Ed. 1006, 3 S. Ct. 327 (1883).
In Waterman v. Canal-Louisiana Bank, 215 U.S. 33, 30 S. Ct. 10, 54 L. Ed. 80, (1909), the plaintiff sought to have certain legacies under her aunt's will declared lapsed, to prohibit two of the testatrix's nephews from sharing certain undisposed property, to have an account taken of all the testatrix's property coming into the possession of the executor, and to have herself declared sole heir at law of the decedent. The Supreme Court held that the relief sought went beyond the equity power of the federal courts insofar as it asked for an accounting of the estate. "* * * [In] so far as the probate administration of the estate is concerned in the payment of debts, and the settlement of the accounts by the executor or administrator, the jurisdiction of the probate court may not be interfered with." Waterman v. Canal-Louisiana Bank, supra at 45, 30 S. Ct. at 13. Yet the court stated that the lower federal tribunal
"has the right to, determine, as between the parties before the court, the interest of the complainant in the alleged lapsed legacy and residuary estate, because of the facts presented in the bill. The decree to be granted cannot interfere with the possession of the estate in the hands of the executor, while being administered in the probate court, but it will be binding upon the executor, and may be enforced against it personally. If the Federal court finds that the complainant is entitled to the alleged lapsed legacy and the residue of the estate, while it cannot interfere with the probate court in determining the amount of the residue arising from the settlement of the estate in the court of probate, the decree can find the amount of the residue, as determined by the administration in the probate ...