Powell v. Best, Trustee

UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re : Chapter 7
ERIC E. POWELL, : Bankruptcy No. 05-11345JKF
Debtor. :
ERIC POWELL,
Plaintiff,
v.
JAY BEST, TRUSTEE,
Defendant.
Adversary No. 05-0120
Memorandum Opinion
Before me is the motion for summary judgment ("SJ Motion") of defendant,
Jay Best, Trustee ("Best"), pursuant to Fed.R.Civ.P. 56(c).1 Best contends this Court
lacks subject matter jurisdiction over this adversary proceeding because the matter
falls within the probate exception to federal court jurisdiction.2 Debtor, Eric Powell
1 Rule 56 is applicable to this proceeding pursuant to Fed.R.Bankr.P.
7056.
2 Neither party has requested this Court to exercise discretionary
abstention over Debtor's claim. However, discretionary abstention may be raised
sua sponte. See Greene v. Wilson-Greene. 1999 WL 689711, at *3 (E.D. Pa.
Sept. 7,1999) (citing Matter of Gober. 100 F.3d 1195, 1207 n.10 (5th Cir. 1996)).
(continued...)
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 1 of 27

("Debtor"), opposes the motion, asserting that his complaint ("Complaint") states a
claim for tortious interference with an inheritance which falls squarely outside of the
probate exception.3 Upon consideration, I conclude that the probate exception does
not apply to a determination of the validity of the trust, which determination may be
all that is necessary to conclude this adversary proceeding and, consequently, that
I have subject matter jurisdiction over it.
2(... continued)
Upon consideration of the issue and the factors that are relevant thereto, see
e.g.. Asousa Partnership v. Pinnacle Foods. Inc. fin re Asousa Partnership). 276
B.R. 55, 74-75 (Bankr. E.D. Pa. 2002) (listing factors that are relevant to a
determination of whether to exercise discretionary abstention), I decline to
exercise my discretion to abstain. Debtor's Chapter 13 Plan is dependent upon
the success of his ability to succeed in this adversary proceeding and it is ready
for trial in this Court; consequently, abstention over this matter will negatively
impact the efficient administration of his estate. Moreover, this litigation will not
be a burden on this Court's docket and there is no evidence that Debtor was
forum shopping in filing his claim here as opposed to the Orphan's Court.
3 The Complaint requests that the Court invalidate a trust agreement
concerning certain real property and place title in that property in the Debtor as
having passed to him through his father's will. At the hearing on this matter on
July 6, 2006, Debtor requested, in the event subject matter jurisdiction is held to
be lacking, that any dismissal be without prejudice or that he be granted leave to
amend the Complaint under Fed.R.Civ.P. 15, incorporated herein by
Fed.R.Bankr.P. 7015, to specifically state a claim for tortious interference with an
inheritance (assuming that he had not done so) which would, he asserts, be
within the Court's subject matter jurisdiction.
-2-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 2 of 27

BACKGROUND4
In 1987, Debtor's father ("Father") and his wife purchased a property at 1229
President Street, Unit A-1, Brooklyn, New York (the "New York Property"). On
November 28,1995, Debtor's father ("Father") signed his Last Will and Testament
("the Will") naming Debtor as the executor of his estate and, in the event his wife
predeceased him, as his sole heir.5 See Exhibit B to Motion. On April 29, 1998,
Father allegedly executed a Special Power of Attorney authorizing the Debtor to
execute any instruments on his behalf.6 Complaint fl6. Father's wife died in
4 Pursuant to the parties' consent at the hearing, the record on the Motion
includes the exhibits attached to Defendant's Memorandum of Law in Support of
Defendant's Motion for Summary Judgment ("SJ Memorandum"), Plaintiffs
Memorandum of Law in Opposition to the Motion of the Defendant for Summary
Judgment in his Favor (the "Response") and Defendant's Reply Memorandum in
Support of Summary Judgment (the "Reply").
I have also taken judicial notice of the dockets and undisputed facts in the
Schedules and Statement of Financial Affairs from the Debtor's bankruptcy
cases. Courts are permitted to take judicial notice of the docket and content of
bankruptcy schedules for the purpose of ascertaining the timing and status of
events in a debtor's bankruptcy case and facts not reasonably in dispute. See
Fed.R.Evid. 201, incorporated into this proceeding pursuant to Fed.R.Bankr.P.
9017. See In re Indian Palms Associates. Ltd.. 61 F.3d 197, 204-206 (3d Cir.
1995); Asousa Partnership v. Manufacturers Alliance Insurance Co. (In re Asousa
Partnership). 2005 WL 2857983, at *4 n.9 (Bankr. E.D. Pa. 2005).
5 Father named his wife as his sole heir. However, in the event his wife
predeceased him, Father named Debtor as his sole heir. See Exhibit B to SJ
Memorandum. In the event both his wife and Debtor predeceased him, Father
named Debtor's sister, Nina Cohen ("Nina"), as his sole heir. See Id.
6 At Debtor's deposition, he testified that his Father was incompetent when
he signed the Special Power of Attorney. See Exhibit G to Reply. Whether
(continued...)
-3-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 3 of 27

December of 1998. Complaint & Answer and Affirmative Defenses of Defendant Jay
Best to the Adversary Complaint of Plaintiff, Eric Power ("Answer") at 1J7. On March
22, 2001, Father signed an Agreement and Declaration of Trust (the "Trust")
transferring title of the New York Property to Best, as trustee, for the benefit of
Debtor's sister, Nina, and her husband, Mendel Cohen (Nina and Mendel Cohen
shall be collectively referred to as the "Cohens"), who, apparently, had been living
in the New York property since its purchase. See Answer and Exhibit C to SJ
Memorandum.
Father died in October of 2001. Complaint & Answer fl10. On July 25, 2003,
Debtor obtained a Decree of Probate and Letters Testamentary for the Will from the
Register of Wills for Philadelphia County. See Defendant's Exhibit D to
SJ Memorandum.
On August 4, 2003, less than two weeks after obtaining the Letters
Testamentary, Debtor filed his first Chapter 13 bankruptcy case. Bankruptcy Case
No. 03-31608, Docket Entry No. 1.7 In January of 2004, the Chapter 13 Trustee
6(...continued)
Debtor is correct about his Father's mental competence when he signed the
document is irrelevant to my ruling regarding subject matter jurisdiction.
7 In his first bankruptcy case, Debtor listed only one piece of real property,
namely the home in which he resides at 8526 Castor Avenue in Philadelphia,
Pennsylvania (the "Pennsylvania Property"), on his Schedule A ("Real Property").
While the Pennsylvania property remained in his Father's name, Debtor listed it
as belonging to him based on his "[ejquitable interest" in the property as the sole
heir to his Father's estate. Bankruptcy Case No. 03-31608, Schedule A. Debtor
(continued...)
-4-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 4 of 27

moved to dismiss the bankruptcy case contending that Debtor failed to make timely
payments under his Chapter 13 plan and that the plan was not feasible. Bankruptcy
Case No. 03-31608, Docket Entry #20. On February 6,2004, a hearing was held on
the motion to dismiss as well as on confirmation of the plan and Debtor's first
bankruptcy case was dismissed, id.,Docket Entry #25. The case was closed on
March 12, 2004.
On February 3, 2005, Debtor filed his second Chapter 13 bankruptcy case.8
Bankruptcy Case No. 05-11345, Docket Entry #1. On February 21, 2005, he
commenced the instant adversary proceeding by filing a Complaint. In the
Complaint, Debtor alleges that the Cohens "fraudulently induced" Father to deed the
New York Property to Best by having him sign the Trust when: (i) his "mental
faculties" were diminished; (ii) he was incompetent to contract; and (iii) he was
incapable of voluntarily executing the Trust because of the Special Power of
Attorney. See Complaint 1flJ1, 9, and 12. Based on these allegations, Debtor
contends that the Trust is "voidable" in favor of Father's estate. ]d. TI1J13. Since he
7(...continued)
did not list or otherwise mention the New York Property on his Schedules or
Statement of Financial Affairs.
8 On Schedule A in his current bankruptcy case, the Debtor listed both the
Pennsylvania Property (again stating that while the property remains in his
Father's name, he possesses an equitable interest in it as his Father's sole heir)
and the New York Property. Explaining the nature of his interest in the New York
Property, Debtor stated that he "claims ownership" in the property as his Father's
sole heir but that "his sister and her husband claim ownership under a trust
executed by [his Father]." Schedule A.
-5-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 5 of 27

is the personal representative and sole beneficiary of his Father's estate, Debtor
alleges that title to the New York Property should be quieted in him. Id. 5114-15.
In the first paragraph of the Complaint, Debtor identifies the reason he
commenced this proceeding, stating:
1. This proceeding is brought by the
Debtor, ... the sole legatee of his late
father,... to quiet title of [the Property].
Complaint 1J1 (italics added). In the last paragraph of the Complaint and his prayer
for relief, Debtor similarly states:
15. Title to the Property should therefore
be quieted in the Debtor, who intends
to sell the Property to pay off the
mortgage under the terms of his
Chapter 13 Plan.
WHEREFORE, the Debtor requests that this court will enter an
order quieting the title of the Property in him.
id. 1f15 & Prayer for Relief (italics added).
Trial on the Complaint was originally scheduled for October 18, 2005.
However, as a result of four amendments to the Pretrial Order, the trial was
continued until July 19,2006.9 On May 11,2006, Best filed a motion to bifurcate the
summary judgment issues in the proceeding between: (i) the probate exception to
9 The Pretrial Order was amended three times pursuant to stipulations of
the parties. The Pretrial Order was amended the fourth time in response to the
a motion by Debtor for an enlargement of time.
-6-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 6 of 27

federal court jurisdiction; and (ii) other issues. On May 16, 2006, the motion to
bifurcate was granted.
After the SJ Motion was filed, Best filed an expedited motion to extend the
dates of the latest Amended Pretrial Order. On June 28,2006, the expedited motion
was granted and the July 19th trial date was cancelled, to be rescheduled upon
further court order. The hearing on the Motion was held and the matter was taken
under advisement.
Best contends that summary judgment should be granted because the subject
matter of this adversary proceeding falls within the probate exception to federal
jurisdiction which the Supreme Court discussed in Marshall v. Marshall. U.S. ,
126 S. Ct. 1735 (2006). Debtor opposes the SJ Motion, arguing that, since his
action is a claim for tortious interference with an inheritance as described in
Restatement (Second) of Torts §774(B) (1979),10 the action is outside of the "probate
exception" and within the subject matter jurisdiction of this Court. Response at 6.
10 Section 774B states:
One who by fraud, duress or other tortious means
intentionally prevents another from receiving from a
third person an inheritance or gift that he would
otherwise have received is subject to liability to the
other for the loss of the inheritance or gift.
Restatement (Second) of Torts §774B (1979).
-7-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 7 of 27

DISCUSSION
I. Legal Standard for Defense of
Subject Matter Jurisdiction
A defendant may raise a court's lack of subject matter jurisdiction as a
defense at any time under Rule 12(h)(3) of the Federal Rules of Civil Procedure. See
Fed.R.Civ.P. 12(h)(3)11 ("Whenever it appears by suggestion of the parties or
otherwise that the court lacks jurisdiction of the subject matter, the court shall
dismiss the action."). See also Kaiser Group International. Inc.. 399 F.3d 558, 565
(3d Cir. 2005) ("It is well-settled law that subject matter jurisdiction can be
challenged at any point before final judgment, even if challenged for the first time on
appeal."). However, the defense should not be raised as a basis for summary
judgment. See Navios Corporation v. National Maritime Union of America. 359 F.2d
853,659 (3rd Cir. 1966) ("A motion for summary judgment is improper when matters
in abatement such as lack of jurisdiction are advanced."). If a bankruptcy court lacks
subject matter jurisdiction over a proceeding, it has no authority to decide the
proceeding on the merits, Marburaer v. Upper Hanover Township. 225 F. Supp.2d
503, 504 (E.D. Pa. 2002) (citing Orthopedic "Bone Screw" Products Liability
Litigation. 132 F.3d 152,155 (3rd Cir. 1997)), and consequently, no authority to grant
summary judgment against the plaintiff, Facha v. Cisneros. 914 F. Supp. 1142,1146
(E.D. Pa.), affd. 106 F.3d 384 (3d Cir. 1996). Nevertheless, a motion for summary
"Rule 12(h)(3) is applicable to this proceeding pursuant to Fed.R.Bankr.P.
7012(b).
-8-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 8 of 27

judgment based on subject matter jurisdiction may be treated as a motion under
Rule 12(h)(3). See Solomon v. Solomon. 516 F.2d 1018, 1027 (3d Cir. 1975)
("Under Rule 12(h)(3) of the Federal Rules of Civil Procedure (28 U.S.C.), lack of
subject matter jurisdiction should be raised and adjudicated by a motion to dismiss,
not a motion for summary judgment."); Navios Corporation. 359 F.2d at 659 (quoting
6 Moore's Federal Practice 1J56.03, p. 2027 (2d ed. 1953) ("'a motion for summary
judgment for lack of jurisdiction over the subject matter may be treated and disposed
of as a motion to dismiss'"); Facha. 914 F. Supp. at 1146 (treating motion for
summary judgment as a motion to dismiss for lack of subject-matter jurisdiction).
When a defendant contests the subject matter jurisdiction of a court, the party
asserting subject matter jurisdiction has the burden of proving its existence. Carpet
Group International v. Oriental Rug Importers Association. Inc.. 227 F.3d 62,69 (3d
Cir. 2000). Since Best has asserted a factual as opposed to a facial challenge to
this Court's subject matter jurisdiction, I may consider matters outside of the
pleadings in ruling on his Motion. See id. ("When a defendant attacks subject matter
jurisdiction "in fact," as opposed to an attack on the allegations of the complaint, the
Court is free to weigh the evidence and satisfy itself whether it has the power to hear
the case."). I have relied upon this principle in determining the relevant facts as set
forth above. See supra n.4.
-9-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 9 of 27

II. Whether Debtor's Claim is an Action for
Tortious Interference with an Inheritance
First we shall turn to the question of whether this matter can be
recharacterized so that it is outside the scope of the probate exception. Debtor
contends that his claim is not within the probate exception because it "falls squarely"
within the definition of a claim for tortious interference with inheritance, as set forth
in the Restatement of Torts (Second) §7746, which the Supreme Court specifically
ruled in Marshall is the type of claim that falls "outside of the narrow scope of the
probate exception." Response at 6. Even were we inclined to torture the Complaint
to read it as sounding in tort, this contention would be erroneous.
Pennsylvania law does not provide for recovery under a claim for tortious
interference with contract "on the basis of inter vivos transfers alleged to diminish an
eventual bequest." Estate of Cletus J. Hollywood v. First National Bank of
Palmerton. 859 A.2D 472 (Pa. Super. 2004). Rather, Pennsylvania law limits the
"parameters" of such claims to "instances involving demonstrable interference with
the testamentary scheme the decedent had sought to create by making changes in
an existing will." Estate of Cletus J. Hollywood v. First National Bank of Palmerton.
859 A.2D 472 (Pa. Super. 2004). As the Third Circuit noted in Golden, supra, the
elements in Pennsylvania for a claim of tortious interference with inheritance are the
following:12
12 Neither party contends that any state law other than Pennsylvania
(continued...)
-10-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 10 of 27

(1) The testator indicated an intent to change his will to
provide a described benefit for plaintiff;
(2) The defendant used fraud, misrepresentation or
undue influence to prevent execution of the
intended will;
(3) The defendant was successful in preventing the
execution of the new will; and
(4) But for the Defendant's [sic] conduct, the testator
would have changed his will.
382 F.2d at 364 (quoting Cardenas v. Schober. 783 A.2d 317, 326 (Pa. Super.
2001)) (correction in 3rd Circuit decision). See also Arena v. McShane. 150 Fed.
Appx. 165, 166-67 (3d Cir. 2005) (quoting Cardenas. 783 A.2d at 326 (citing
Marshall v. De Haven. 209 Pa. 187, 58 A. 141, 142 (1904)). Based on these
elements, Pennsylvania law requires a plaintiff stating a claim for alleged
interference with inheritance to "demonstrate" that "the decedent has sought to make
changes to his will to plaintiffs benefit, and that the defendant, through means of
fraud, misrepresentation, or undue influence thwarted the decedent's intent." Estate
of Cletus J. Hollywood, supra. 859 A.2d at 478. Based on the Complaint's
allegations, Debtor has not, and cannot, state such a claim here.
12(...continued)
applies to the Debtor's action. Rather, both parties cite to Pennsylvania law in
support their respective positions. See Marshall v. Marshall. 275 B.R. 5, 50 n.3
(C.D. Cal. 2002) (assuming that the law of Texas applied to the parties' dispute
because neither party contended that anything but such law applied), adopted
as modified by, 275 B.R. 5 (C.D. Cal. 2002), vacated and remanded, 392 F.3d
1118 (2004), reversed and remanded, 126S. Ct. 1735, U.S. (2006).
-11-
I
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 11 of 27

III. The Supreme Court's Decision in Marshall v. Marshall
on the Probate Exception to Federal Jurisdiction
Best supports his contention that subject matter jurisdiction is lacking by citing
the recent decision of Marshall v. Marshall, supra, wherein the Supreme Court
discussed the contours of what it labeled as the "narrow" probate exception to
federal jurisdiction. 126 S.Ct. at 1744. The Supreme Court ruled that the Ninth
Circuit Court of Appeals had interpreted the exception too broadly when it held that
the exception prevented the bankruptcy court from deciding a claim for tortious
interference in an adversary proceeding before it.
The debtor in Marshall was Vickie Lynn Marshall ("Widow"), also known as
Anna Nicole Smith, who survived her very wealthy older husband, J. Howard
Marshall, II. id. at 1741. One of her husband's sons (the "Son") was the beneficiary
of his estate, id. at 1742. While her husband's estate was subject to ongoing
proceedings in the probate court caused by various claims to his fortune, the Widow
filed a Chapter 11 bankruptcy case. Jd. The Son filed a proof of claim against the
Widow for allegedly defaming him; she answered his claim and asserted a
counterclaim against him, including a claim that he had tortiously interfered with a
gift she had expected from her late husband.13 id.
13 Since Widow included a counterclaim in her objection to Son's
defamation claim, it became an adversary proceeding pursuant to Fed.R.Bankr.P.
3007. Id.
-12-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 12 of 27

The bankruptcy court granted summary judgment in favor of the Widow on the
Son's claim and, following a trial on the merits, entered final judgment in her favor
on her tortious interference claim. Id- In a post-trial motion and on appeal, the Son
claimed lack of subject matter jurisdiction. Neither the bankruptcy court nor the
district court ruled in his favor on this issue, id. Like the bankruptcy court,14 the
district court also granted judgment on the Widow's claim in her favor and against
the Son. id. at 1743-44. The Son subsequently appealed to the Ninth Circuit.
On appeal, the Ninth Circuit reversed, concluding that the probate exception
barred federal jurisdiction. Id- at 1744. It reasoned that "a claim falls within the
probate exception if it raises 'questions which would ordinarily be decided by a
probate court in determining the validity of the decedent's estate planning
"instrument," whether those questions involve 'fraud, undue influence [or,] tortious
interference with the testator's intent.'" 126 S.Ct. at 1744 (quoting Marshall v.
Marshall. 392 F.3d at 1118,1133 (9th Cir. 2004)).
In reversing the Ninth Circuit and clarifying the limits of the probate exception,
the Supreme Court interpreted the following two paragraphs from a decision which,
14 The district court held that the bankruptcy court did not have core
jurisdiction to enter a final judgment on the Widow's claim so it treated the
bankruptcy court's decision as proposed findings of fact and conclusions of law.
Marshall v. Marshall. 275 B.R. 5,10 (C.D. Cal. 2002), vacated and remanded by
392 F.3d 1118 (9th Cir. 2004), reversed and remanded by U.S. , 126 S.Ct.
1735(2006).
-13-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 13 of 27

despite its having been issued in 1946, was the Supreme Court's "most recent
pronouncement of the probate exception:"
It is true that a federal court has no jurisdiction to
probate a will or administer an estate ... But it has been
established by a long series of decisions of this Court that
federal courts of equity 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.
Similarly, while a federal court may not exercise
jurisdiction to disturb or affect the possession or property
in the custody of the estate 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 that the state
court is bound by the judgment to recognize the right
adjudicated by the federal court.
Markham v. Allen. 326 U.S. 490, 494 (1946) (citations omitted) (italics added).
The Supreme Court began its interpretation of these paragraphs by focusing
on the first paragraph which it observed was not "a model of a clear statement."
Marshall. 126 S. Ct. at 1747-48 (italics added). Explaining this paragraph, the
Supreme Court stated: "[F]ederal courts have jurisdiction to entertain suits to
determine the rights of creditors, legatees, heirs, and other claimants against a
decedent's estate 'so long as the federal court does not interfere with the probate
proceedings." id. at 1748 (italics added by Supreme Court) (quoting Markam v.
Allen. 326 S. Ct. at 494). Recognizing that lower courts had long been puzzled over
-14-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 14 of 27

the meaning of the phrase "interfere with the probate proceedings" and,
consequently, have read the "words to block federal jurisdiction well beyond probate
of a will or administration of a decedent's estate," the Supreme Court explained that
the phrase proscribes "'disturb[ing] or affect[ing] the possession of property in the
custody of a state court." Marshall. 126 S. Ct. at 1748 (quoting Markham v. Allen.
326 U.S. at 494). Noting that this interpretation "renders the first-quoted passage
in part redundant," the Supreme Court reasoned that "redundancy is preferable to
incoherence." Jd. at 1748. Restating its point, the Supreme Court stated that the
"'interference language'" is "essentially a reiteration of the general principle that,
when one court is exercising in rem jurisdiction over a res, a second court will not
assume in rem jurisdiction over the same res." id-
The Supreme Court then summarized the confines of the probate exception,
instructing:
Thus, the probate exception reserves to state probate
courts the probate or annulment of a will and the
administration of a decedent's estate; it also precludes
federal courts from endeavoring to dispose of property that
is in the custody of a state probate court. But it does not
bar federal courts from adjudicating matters outside those
confines and otherwise within federal jurisdiction.
Id. Applying these principles of the probate exception, the Supreme Court
concluded that the Widow's claim was not within the probate exception because it
did not "involve the administration of an estate, the probate of a will, or any other
purely probate matter." id. In so concluding, the Supreme Court specifically relied
-15-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 15 of 27

upon the following four characteristics of the Widow's claim: (i) the claim alleged a
widely recognized tort under the Restatement (Second) of Torts § 774B (1979); (ii) it
sought an in personam judgment against the Son rather than the probate or
annulment of a will; (Hi) it did not seek to reach a res in the custody of a state court;
and (iv) it required no special proficiency to handle. ]d. at 1748-49.
The Supreme Court also addressed one additional major point which is
significant here. It emphasized that state legislation cannot impair federal
jurisdiction. On this point, the Supreme Court noted that it had previously held that
"the jurisdiction of the federal courts, 'having existed from the beginning of the
Federal Government, [can]not be impaired by subsequent state legislation creating
courts of probate.'" id. at 1749 (quoting McClellan v. Garland. 217 U.S. 268, 281
(1910)(upholding federal jurisdiction over action by heirs of decedent, who died
intestate, to determine their rights in the estate). This observation by the Supreme
Court also was noted by the Third Circuit in Golden v. Golden. 382 F.3d 348 (3d Cir.
2004), which also focused on the probate exception.
At dispute in Golden was a will that transferred all of the decedent's property
to a trust which she created while she was alive. 382 F.3d at 352-53. She named
herself as the trustee; upon her death, her son became the sole trustee. Id. Under
the terms of the trust, the trust corpus was, upon her death, to distributed in three
equal shares to her beneficiaries. Jd. However, while she was bedridden and under
hospice care, she purportedly executed the addendum revising her testamentary
-16-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 16 of 27

scheme to increase the legacy granted to the son who was named as the trustee
and decrease the legacy granted to the other two beneficiaries. ]d.
The trust in Golden was an inter vivos trust since it was created during the
decedent's lifetime rather than by a will. See Blacks Law Dictionary 826-27 (7th ed.
1999) (definition for "inter vivos"). See also 20 Pa.C.S.A. § 711 (3) ("'Inter vivos trust'
means an express trust other than a trust created by a will, taking effect during the
lifetime or at or after the death of the settlor.");15 Peter Nicoulas, Fighting the Probate
Mania: A Dissection of the Probate Exception to Federal Court Jurisdiction, 74 S.
Cal. L. Rev. 1479, 1492-93 (September, 2001) (explaining that an inter vivos trust
is "created and take[s] effect during the settlor's lifetime" whereas a testamentary
trust does not take effect "until the settlor dies."). In the same vein, the trust at issue
in the instant case is an inter vivos trust; it was executed by Father and took effect
during his lifetime. Most importantly, however, the Trust does not provide for the
distribution of the Trust property upon the death of either the grantor, Father, or the
Beneficiaries, the Cohens. Exhibit C to SJ Motion.
15 Section 711 (3) specifically recognizes that the term "inter vivos trust"
does not include "a resulting or constructive trust created by operation of law."
20 Pa.C.SA §711(3). As one of his defenses to Debtor's claim that the trust is
not valid, Best asserts that the a constructive trust of the New York Property
exists in the Cohen's favor. Since constructive trusts are not even included in the
term "inter vivos" under §711 (3), this defense has not been legislated as being in
the orphan's court jurisdiction. Neither party has argued to the contrary.
-17-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 17 of 27

The relevant issue in Golden was whether the probate exception applied to
the appellants' action which sought, through various theories, to challenge the
distribution of assets from the decedent's estate. Golden, supra. 382 F.3d at 357.
The parties presented categorical arguments on this issue, id- at 360. The
appellant argued that actions involving inter vivos trusts are never subject to the
probate exception because it only applies to wills and not to trusts regardless of
whether "the trust operates as a will, distributing the corpus upon the death of the
settlor." Id. at 359. The appellee disagreed, contending that, under Pennsylvania
law, the probate exception perse applied to all of the appellant's claims because 20
Pa.C.SA §711(3) vests the Orphan's Court with jurisdiction to administer and
oversee actions seeking to reform inter vivos trusts, jd. at 359-60. Section 711(e)
of Pennsylvania's statutory law provides, in pertinent part, that jurisdiction over the
"administration and distribution of the real... property of inter vivos trusts and the
reformation or setting aside of such trusts" resides in the Orphan's Court. See 20
Pa.C.SA §711 (3).16
16 Section 711(3) states:
[T]he jurisdiction of the court of common pleas over the
following shall be exercised through its orphan's court
division:
* * *
(3) Inter vivos trusts. - The administration and
(continued...)
-18-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 18 of 27

The Third Circuit rejected both of the parties' viewpoints. Id- at 359-60. The
Third Circuit ruled that actions involving inter vivos trusts are not categorically
outside of the probate exception, but also that the probate exception does not apply
categorically to all claims involving the reformation of inter vivos trusts. Id- In so
concluding, the Third Circuit opined that a "state's interest in managing all
challenges addressing an estate res located in that state or with which the state has
some meaningful connection... is no less compelling if the res is distributed by trust
rather than by will." ]d. at 359 (emphasis in original). While the Third Circuit's
reference to "all challenges addressing an estate res" now would be overly broad
given the Supreme Court's clarification in Marshall of the narrow nature of the
probate exception, the Third Circuit's rationale, that causes of action involving trusts
which distribute estate assets are treated under the probate exception in the same
way as actions involving wills, remains viable. Id. at 359.
In rejecting the appellee's "opposite categorical position" that the probate
exception applied to all of the appellants' claims under §711(3), the Third Circuit
explained that the fact that a trust is involved does not automatically render the
16(...continued)
distribution of the real and personal property of inter
vivos trusts, and the reformation or setting aside of any
such trusts[.]
20 Pa.C.S.A. §711(3).
-19-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 19 of 27

probate exception applicable to the matter even if a state has legislated otherwise.
Id. at 359-60. On this point, the Third Circuit explained:
A state cannot expand the probate exception - and defeat
otherwise proper federal jurisdiction over a matter- simply
by vesting exclusive authority over otherwise in personam
actions in state court. That is to say, if a claim is
otherwise outside the scope of the probate exception, a
federal court is not divested of jurisdiction simply because
the state places that sort of claim in state probate court.
Id- at 360 (citations omitted). Based on the foregoing analysis, the Third Circuit
concluded that since the trust in the matter before it constituted a will substitute, it
was necessary to examine the substance of each of the appellant's claims to
determine whether the probate exception was applicable to it. id.
Focusing on the appellants' claims of undue influence, forgery and fraud, the
Third Circuit ruled that they were within the probate exception because they "would
interfere with the already-completed probate proceedings!.]" Id. at 360-63. In so
holding, the Third Circuit reasoned that when the Register of Wills probated the
decedent's will, the Orphan's Court implicitly determined that the will, the trust, the
addendum and their combined distributive scheme were enforceable and valid;
therefore, a ruling in appellants' favor on these claims (for undue influence, forgery
and fraud) would strike at that determination of validity and would be inconsistent
with the Orphan Court's jurisdiction, id. The Third Circuit also examined the
appellants' claim for breach of fiduciary duty by the executor, determining that it too
was within the probate exception because it related to the administration and
-20-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 20 of 27

management of the decedent's estate, id. at 361-62. Lastly, the Third Circuit
considered appellants' in personam claims for slander and tortious interference with
inheritance. Jd. at 363-66. The Third Circuit ruled that these claims did not fall within
the probate exception because under state law they could be decided in appellants'
favor without directly contradicting the probate court's determination that the will, the
trust and the addendum were valid, id. In the instant matter, however, the trust is
not a will substitute, nor will a determination regarding its validity interfere with any
probate proceedings as set forth below.
IV. Application of the Probate
Exception to the Instant Case
According to the Complaint, the Cohens "fraudulently induced" Father to deed
the New York Property to Best by having him sign the Trust when he was mentally
and legally unable to do so. Complaint ffl| 1,9, and 12. As a result, Debtor alleges,
the Trust is "voidable" in favor of Father's estate and, since Debtor is the sole
beneficiary of the estate, title to the property should be quieted in him. ]d. fflf 13-15.
In short, Debtor seeks to have this Court determine that the Trust is invalid and that
title to the New York Property should have vested in him.
Resolution of the Debtor's contention that the Trust is invalid will not "disturb
or affect the possession of property in the custody" of the Orphan's Court. See
Markham v. Allen. 326 U.S. at 494. The res of the Trust, namely the New York
Property, has never been in the custody of the Orphan's Court because it is not an
-21-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 21 of 27

asset that was ever part of the Father's estate. See Abercrombie v. Andrew College.
_ F. Supp.2d 2006 WL176857, at *8 (S.D.N.Y. June 15,2006) (reasoning that
"unless and until some judicial authority" accepted the plaintiffs objections to the
validity of an inter vivos gift deeding the property at issue to the defendant, the
property was not party of the decedent's estate but belonged to the defendant);
Hoffman v. Sumner. 2006 WL 1444677, at *2 (N.D. III. May 18, 2006) (in the event
plaintiffs' theory of stock transfer was correct, "the stock shares are not currently an
asset of [the decedent's] estate, so determining plaintiffs' and defendants' rights as
to the shares would not interfere with the state court's administration of [the
decedent's] estate."). Nor will the resolution of this matter interfere with the probate
proceedings. Neither the Debtor nor Best is challenging the validity of the Will or the
designation of Debtor as the sole beneficiary under the Will. Indeed, Debtor's claim
relies upon the validity of the Will. Debtor's challenge is to the validity of the Trust.
The Orphan's Court has never ruled on this issue or had this issue or the Trust and
its asset before it. Therefore, a ruling on the matter cannot interfere with the probate
proceedings. See Abercrombie. supra. 2006 WL 1716857, at *8 (where purpose of
the lawsuit was to increase assets of the estate, the lawsuit was outside the bounds
of the probate exception). Moreover, no "special proficiency" is required to decide
the Trust's validity. Bankruptcy Courts routinely determine challenges to property
claimed by debtors under 11 U.S.C. §541. Consequently, the probate exception
does not bar this Court from exercising jurisdiction over whether the Trust is valid.
-22-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 22 of 27

Furthermore, federal jurisdiction over this matter is not proscribed by the
Pennsylvania legislature's enactment of 20 Pa.C.SA §711. While this provision
purports to vest the Orphan's Court in Pennsylvania with authority over the
administration and distribution of real property of inter vivos trusts and the
reformation and setting aside of such trusts, state legislation cannot decrease
federal jurisdiction when it exists.
V. Whether this Court has Authority to
Quiet Title to the New York Property
or Grant Other Appropriate Relief
In his prayer for relief, Debtor requests this Court to enter an order quieting
title to the New York Property in his name. See also Complaint fflj 1,15. Neither of
the parties have cited any case law on whether this Court has authority to render
such relief.17 I shall not decide the issue at this point since it has not been
17 Rule 7070 of the Federal Rules of Bankruptcy Procedure provides:
Rule 70 F.R.Civ.P. applies in adversary proceedings
and the court may enter a judgment divesting the title of
any party and vesting title in others whenever the real or
personal property involved is within the jurisdiction of the
court.
Fed.R.Bankr.P. 7070. Since I have subject matter jurisdiction over Debtor's
challenge to the Trust and, therefore, over the res of the Trust, I may have
authority under Rule 7070 to divest Best of the title to the property and vest it in
the Debtor. However, even if Debtor is entitled to other relief, his failure to
request it does not bar this Court from granting it to him. Rule 54(c) of the
Federal Rules of Civil Procedure, incorporated herein pursuant to Fed.R.Bankr.P.
7054, states, in pertinent part:
(continued,..)
-23-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 23 of 27

determined that Debtor is entitled to any relief. Best opposes Debtor's claim that the
Trust is not valid. He also contends, as an alternative to this defense, that a
constructive trust exists in the Cohens' favor over the New York Property. As I have
already determined, these issues are not subject to the probate exception. See n.15
& Part IV. Moreover, in the event that I resolve either of these issues in Best's favor,
this adversary proceeding will conclude without the need for any further action.
17(...continued)
Except as to a party against whom judgment is entered
by default, every final judgment shall grant the relief to
which the party in whose favor it is rendered is entitled,
even if the party has not demanded such relief in the
party's pleadings.
Fed.R.Civ.P. 54(c). See USX Corporation v. Barnhart. 395 F.3d 161, 165 (3d Cir.
2004) (quoting Fed.R.Civ.P. 54 advisory committee's note to 1937 adoption)
(observing that the advisory committee's note for Rule 54(c) explains that subpart
(c) of the rule "'makes clear that a judgment should give the relief to which the
party is entitled, regardless of whether it is legal or equitable or both.'"). See also
Thomas v. Board of Trustees of International Union of Operating Engineers.
Local 542.1998 WL 334627, at *12-13 (June 24, 1998) (even though plaintiff had
requested relief which he could not be lawfully granted, summary judgment would
be granted in his favor on a claim for restitution under Rule 54(c); Rued v. Aeriest
Bank. 1991 WL 25565, at *4 (E.D. Pa. Feb. 25, 1991) (quoting Stanton v.
Tarantino. 637 F. Supp. 1051,1065 (E.D. Pa. 1986))("Despite the plaintiffs
failure to demand the usual relief granted in this kind of case, 'this Court may
grant such relief if appropriate'" under Rule 54(c)).
-24-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 24 of 27

V. Summary
Based on the foregoing discussion, Best's Motion shall be denied. An
Order consistent with this Memorandum Opinion shall be entered.
JEANKFIT^SpDN
United States Bankruptcy Judge
Dated: August 18, 2006
-25-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 25 of 27

UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re
ERIC E. POWELL,
Debtor.
ERIC POWELL,
Plaintiff,
v.
JAY BEST, TRUSTEE,
Defendant.
Chapter 7
Bankruptcy No. 05-11345JKF
Adversary No. 05-0120
ORDER
AND NOW, this 18th day of August, 2006, upon consideration of Defendant's
Motion for Summary Judgment ("Motion") and after hearing with notice, and for the
reasons set forth in the accompanying Memorandum Opinion, it is hereby
ORDERED and DECREED that:
1. The Motion is Denied; and
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 26 of 27

2. The parties have fourteen (14) days from the
date of this Order to file any additional
motions for summary judgment.
3. In the event that neither party files a motion
for summary judgment, the parties shall file a
Joint Pretrial Statement on or before
September 8,2006, and a pretrial conference
shall be scheduled after this date.
JEAN KmjJSIMON
United States~Bankruptcy Judge
Copies to:
Counsel for Plaintiff/Debtor
David A. Scholl, Esquire
6 St. Albans Avenue
Newtown Square, PA 19073
Counsel for Defendant
Brian R. Mildenberg, Esquire
Mildenberg and Stalbaum, P.C.
1845 Walnut Street, 22nd Floor
Philadelphia, PA 19103
William C. Miller, Trustee
PO Box 40119
Philadelphia, PA 19106-0119
-2-
Case 05-00120-ref Doc 48 Filed 08/18/06 Entered 08/21/06 16:41:46 Desc Main
Document Page 27 of 27