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Lubin v. Chicago Title and Trust Co.

November 6, 1958


Author: Parkinson


PARKINSON, Circuit Judge.

Appellants, plaintiffs below, alleging certain wrongful acts of defendant Chicago Title and Trust Company, in its capacity as trustee, seek to surcharge it with loss of trust income. In the alternative they ask damages totalling $4,000,000.

The District Court held that Marie Lundberg Lubin, hereinafter referred to as Marie, nominal settlor of the trust, and Mollie Lubin, executrix of the estate of Herbert Lubin, deceased, hereinafter referred to as Mollie, executrix, were indispensable parties. After Marie and Mollie, executrix, were made defendants because they would not join as plaintiffs, the Court refused to align them with the plaintiffs and held that this destroyed diversity jurisdiction. The action was, therefore, dismissed and this appeal followed.

Herbert Lubin, hereinafter referred to as Herbert, and Marie were husband and wife and had two children, the present plaintiffs. On June 21, 1927 Herbert, through Marie as nominal settlor, created a trust fund of $1,750,000. The defendant Chicago Title and Trust Company was appointed trustee. By the terms of the trust Marie was to receive $10,000 a year with the remainder of the income to Herbert. Upon Herbert's death Marie's interest would terminate and all income would go to the two plaintiffs. The corpus was to be distributed to the plaintiffs when each became 35.

Herbert died on January 29, 1953 and at that time his interest in the trust along with that of Marie terminated. Mollie was named executrix of his estate, Marie and Herbert having been divorced prior to Herbert's death.

In the year 1931 certain creditors, including the United States, successfully followed the funds into the trust. Litigation ensued resulting in a court decree directing payment by the trustee of approximately $300,000. The decree stated that the payments were to be made solely from the corpus of the trust and that neither Herbert nor Marie could be held responsible for its depletion.

In 1934 another creditor of Herbert attempted to reach the corpus of the trust. The plaintiffs here were, with others including the Trustee, party defendants in that litigation. The defendants prevailed and the creditor was defeated.

It also appears that in 1932 Herbert for consideration, not here important, agreed not to institute any action against the Trustee for what he apparently thought were wrongful acts in its management of the trust.

For jurisdictional purposes the plaintiffs are citizens of California as are both Marie and Mollie, executrix. The defendant Trustee is an Illinois corporation.

Defendant Trustee in its brief and in oral argument before this court makes many references to the original complaint and the three intervening amended complaints. However, in deciding the issue before us we must examine only the fourth amended complaint. It is hornbook law that an amended complaint complete in itself and making no reference to nor adopting any portion of a prior complaint renders the latter functus officio. Ericson v. Slomer, 7 Cir., 1938, 94 F.2d 437, 439; Nisbet v. Van Tuyl, 7 Cir., 1955, 224 F.2d 66, 71. Therefore, limiting ourselves to the fourth amended complaint we must from it alone determine whether Marie and Mollie, executrix, are indispensable parties and if so with which side should they be aligned.

One is not an "indispensable party" merely because he has some interest in the subject matter of the litigation nor because his presence is required for a complete adjudication in that suit of all questions related to the litigation. The test here is whether the interests of Marie and Mollie, executrix, in the subject matter of the litigation is such that no decree could be entered in this case which would do justice to the plaintiffs and the Trustee without injuriously affecting the rights of Marie and Mollie, executrix, or either of them. Texas Co. v. Wall, 7 Cir., 1939, 107 F.2d 45, 50; Wesson v. Crain, 8 Cir., 1948, 165 F.2d 6, 9.

The amended complaint here in question alleges six specific instances of misconduct on the part of the Trustee.

Three of these allegations charge the Trustee with having purchased from itself as an individual three notes made by other parties that were inadequately secured and all of which were eventually defaulted. The Trustee is charged with having thereby shifted the loss on an improvident investment from itself to the trust.Assuming, arguendo, that these charges are true neither ...

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