Seitz, Chief Judge, Hastie, Circuit Judge, and Herman, District Judge.
This case comes on appeal from a directed verdict in favor of the defendants in the United States District Court for the Western District of Pennsylvania.
Plaintiff-appellant William Clyde III alleged mistake, undue influence or fraud on the part of Emma Clyde Hodge and Edwin Hodge, Jr. (the Hodges). Appellant seeks $500,000 in general damages and an additional $500,000 in punitive damages. The alleged undue influence arises out of a trust created by Margaret Burns Clyde (settlor), appellant's grandmother. The inter vivos trust, created January 31, 1933, excluded appellant from participation in its proceeds. The trust instrument was made irrevocable by the settlor in March 1934. Mrs. Hodge is the settlor's daughter.
Stated as briefly as possible and in a fashion favorable to plaintiff, the facts surrounding the trust are as follows:
The settlor's husband, William Gray Clyde, died March 23, 1931, leaving an estate appellant asserts to have been in the area of $1,000,000 (Mr. Clyde acquired his wealth in part from his position as President of the Carnegie Steel Corporation). Margaret Burns Clyde was named co-executor of the estate with her son-in-law Edwin Hodge. Margaret Clyde renounced in favor of Mr. Hodge, leaving him as the sole executor of Mr. Clyde's estate.
Margaret Burns Clyde, as sole beneficiary, proceeded by all accounts to spend large sums of money. A single New Jersey dress shop bill totaled in excess of $80,000. Plaintiff contends Mrs. Clyde had spent about $300,000 by the end of 1932. (By the time the trust funds were ultimately distributed their value had nearly returned to the $1,000,000 level, appellant alleges) Between the time of her husband's death and the creation of the trust, Mrs. Clyde moved from Pennsylvania to New Jersey. Prior to the move the settlor was in close, almost daily, contact with her daughter, Emma Clyde Hodge, and her son-in-law. She also frequently saw and vacationed with the Hodges' three children.
During the Christmas holidays of 1932 the settlor traveled to Pittsburgh to visit defendants. Shortly afterwards, on January 2, 1933, Mrs. Clyde signed a will in which, among other things, she disinherited plaintiff. Thereafter, on January 31, she signed the trust indenture at issue. Mrs. Clyde's first visit with the trustee was in Toledo in the company of William Clyde II.*fn1
The trust, established with the Toledo Trust Company, included virtually all the assets of Mr. Clyde's estate. The assets were placed in a revocable trust, giving Mrs Clyde a reserved life estate of income and principal (that flow of income to be under trustee supervision). The balance of the res was to be distributed to each of the three Hodge children equally via Mrs. Hodge upon Mrs. Clyde's death. (See Appendix with relevant trust provisions) Most notable is the statement, "At the time of the execution of this Trust Indenture, Donor's son, William J. Clyde, has no children. . . ." (Trust Indenture, Article III(d) (2)).
In March 1934, Mrs. Clyde, in the presence of a bank officer and without the defendant's presence, made the trust irrevocable.*fn2 The bank representative testified that Mrs. Clyde made "no comment" when the erroneous statement was read.
In 1936 defendants allegedly engaged lawyers to look into a competency hearing for the settlor in light of a possible remarriage. No marriage or competency hearing then occurred. However, in 1942 Mrs. Clyde married one Mr. John Kniley. At that time ex parte competency hearings were instituted and Mrs. Clyde was subsequently ruled incapable of managing her properties. The settlor was then about 73 years old.*fn3
In 1947 Mrs. Clyde died. Her trust assets were distributed according to the terms of the indenture.
Because of the unusual nature of this suit, its complex history bears repetition here.
Appellant originally filed suit in district court, naming as defendants the Hodges and their three children. Edwin and Emma Clyde Hodge were not beneficiaries under the portion of the trust here involved. The trustee, Toledo Trust Company, of Toledo, Ohio, was not a party. Mr. Clyde III sought damages from the Hodges, a constructive trust placed on the trust proceeds received by the children of the Hodges and an order determining the rights of the parties under the trust.
Before any decision was rendered by the district court in the present case, an action was brought in an Ohio state court by the Toledo Trust Company as trustee of the inter vivos trust for the purpose of "securing advice and instructions" concerning the administration of the trust. In particular, the trustee sought a determination of whether appellant had any interest in the trust assets. The problem arose because the trust instrument contained a recital that William Johnson Clyde, appellant's father, had no children; whereas, appellant's father did then have a child; namely, appellant.*fn4 The children of the Hodges, but not the Hodges themselves, as well as the appellant, together with "all other persons known to have interests or claims of interest" in the income or corpus of the trust were named there as defendants.
The children of the Hodges answered the petition and claimed that the distributions were properly made to them pursuant to the provisions of the trust instrument and in accordance with the express intention of the settlor. Appellant also filed an answer to the trustee's petition as well as a cross-petition challenging the trustee's activities in connection with the preparation of the trust instrument and including a charge that the trustee engaged in a fraudulent scheme and conspiracy with the Hodges to deprive appellant of an interest in the trust. By the cross-petition, appellant sought a reformation of the trust instrument to provide him with the interest in the trust he would have received had the settlor been properly informed, instructed, and advised by the trustee.
After final hearing in an unreported opinion, the Ohio court determined, inter alia, that the agreement accurately reflected the settlor's intent and that the trust was "valid and subsisting." It gave instructions that payments should be made in accordance with its terms. Appellant's cross-petition was dismissed with prejudice, and no appeal was taken.
Thereafter, the district court granted a motion for summary judgment by appellees. It ruled, inter alia, that the judgment in the Ohio action, to which the appellant had been a party, barred the instant suit "under the principles of res judicata."
On appeal from that district court ruling, this court (see, Clyde v. Hodge, 413 F.2d 48 (3d Cir. 1969)) affirmed in part and reversed in part. This court affirmed the district court in each of its rulings except as regarded the damage suit by appellant against the Hodges. This court found the damage suit against the Hodges not to be res judicata as a result of the Ohio ruling. (For the court's reasoning in the reversal, see 413 F.2d, at 50, 51)
On remand the district court took approximately 1,000 pages of testimony before granting the defendants' ...