Cadwell v. Citibank, N.A.
- Gregory Woods
- 1:23-cv-01315
- U.S. District Court · Southern District of New York
- 9
In Cadwell v. Citibank, Judge Woods denied dismissal and partly granted and partly denied summary judgment over trust administration and asset transfers.
The ruling affects the plaintiffs acting as co-trustees, Citibank, the Individual Defendants, and the continuing process for accounting for and possibly transferring assets from the trusts. The case was not ended by the order; the request for immediate asset transfer was denied without prejudice and further evidence and briefing were required.
What happened
Cadwell v. Citibank, N.A. concerns Jason N. Cadwell and Harald B. Findlay, acting as co-trustees, and their claims involving several trusts and Citibank. The Individual Defendants argued that a federal court could not hear the case because of the probate exception and a Vermont Probate Court’s authority over the trust assets.
The court rejected those arguments. It held that the probate exception did not apply because the will had already been probated and the trusts were not under the Vermont court’s jurisdiction when the amended complaint was filed. The court also adopted the conclusion that the exercise of the relevant power of appointment was permitted.
Judge Woods adopted Magistrate Judge Parker’s recommendation in full. The court denied Defendants’ motion to dismiss and granted in part and denied in part the plaintiffs’ motion for summary judgment. The request for an order requiring Citibank to transfer assets immediately was denied without prejudice, and the parties were directed to submit additional evidence and briefing about the accounting and possible transfers.
The detailed version
- Cadwell v. Citibank, N.A. · No. 1:23-cv-01315
- Gregory Woods
- Feb. 20, 2024
Background
Jason N. Cadwell and Harald B. Findlay sued in their capacities as co-trustees of the Edward A. Deeds Revocable Trust. Citibank was named as a trustee of other Deeds trusts, and the case also named Diane Stebbins, Susan Griffis, Martha Deeds, Jennifer Huff, Elizabeth MacKenzie, and Edward A. Deeds, Jr. as Individual Defendants.
The Individual Defendants moved to dismiss the amended complaint. The plaintiffs separately moved for summary judgment, which asks the court to decide issues without a trial when the relevant facts are not genuinely disputed. Magistrate Judge Katharine Parker recommended denying the motion to dismiss and granting in part and denying in part the plaintiffs’ motion for summary judgment. She specifically recommended denying the request for an order requiring Citibank to transfer assets immediately.
Issues and analysis
The Individual Defendants objected to the recommendation on the ground that the probate exception barred federal jurisdiction. They argued that the trust acted as a substitute for a will and that the Vermont Probate Court had exercised authority over the trust assets.
Judge Woods rejected both arguments. He explained that the probate exception is limited and did not extend to the trust at issue because the will had already been admitted to probate and completely probated. The trusts in the cases cited by the Individual Defendants had been subject to a state court’s authority over property, unlike the circumstances the court found here.
The court also concluded that the Vermont Probate Court was not exercising jurisdiction over the relevant trusts when the amended complaint was filed. Although the original complaint was filed on February 15, 2023, the amended complaint was filed on May 11, 2023, two days after the Vermont Probate Court vacated its decision. The court treated the amended complaint as the operative complaint for determining subject-matter jurisdiction and concluded that any jurisdictional problem was cured by that filing.
The court further adopted Judge Parker’s conclusion that the Grandson’s exercise was permitted by the Grandparent Trusts. It reasoned that, under New York law, an authorized power of appointment may be exercised less extensively than allowed unless the trust instrument shows a contrary intent. The court concluded that transferring assets into a trust for Mrs. Deeds was not an invalid exercise merely because the instrument allowed a transfer to her directly.
Disposition
The court adopted the Report and Recommendation in full, rejected the Individual Defendants’ objections, and denied Defendants’ motion to dismiss. It granted in part and denied in part the plaintiffs’ motion for summary judgment. The summary-judgment motion was denied without prejudice insofar as it sought an order requiring Citibank to transfer assets at that time.
The parties were directed to submit additional evidence and briefing concerning the funds needed to complete the accounting and whether any portion of the Grandparent Trusts’ assets could be transferred before the accounting was complete. Judge Parker would manage those remaining issues under the existing order of reference. Judge Woods directed the Clerk of Court to terminate the motions at Docket Nos. 46 and 53.
Read the full 9-page opinion on CourtListener, the free public archive maintained by the Free Law Project.