Schwartz v. Wellin et al
Filing
173
ORDER granting 80 Motion to Substitute Party. Signed by Honorable David C Norton on 10/9/2014.(cahe, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
LESTER S. SCHWARTZ, as Trust
Protector of the Wellin Family 2009
Irrevocable Trust,
Plaintiff,
vs.
PETER J. WELLIN, et. al.,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
No. 2:13-cv-3595-DCN
ORDER
This matter is before the court on a motion “to ratify and join in the
commencement of this action and/or to be substituted or added as party-plaintiff” filed by
Lester S. Schwartz (“Schwartz”). Schwartz also seeks to amend the complaint. For the
reasons stated below, the court grants Schwartz’s motion and substitutes Larry S.
McDevitt (“McDevitt”) as the plaintiff in this case.
I. BACKGROUND
Because the parties are well-versed in the facts of this case, the court recites only
the facts relevant to the disposition of the motion at hand.
On November 20, 2013, Keith Wellin appointed attorney Schwartz as the trust
protector for the Wellin Family 2009 Irrevocable Trust (“the Trust”). Following the
liquidation of the Trust’s assets in December 2013, Schwartz filed the instant complaint
in Charleston County Probate Court against defendants Peter Wellin, Cynthia Plum, and
1
Marjorie King, Keith Wellin’s three children, as well as Friendship Management LLC.1
On December 27, 2013, defendants removed the case to this court.
On January 17, 2014, defendants filed a motion to dismiss this case on the basis
that Schwartz does not qualify as a real party in interest under Rule 17. On April 17,
2014, the court issued an order granting defendants’ motion to dismiss (“the April 17
order”). Because both South Dakota law and the Federal Rules of Civil Procedure
require a court to allow a reasonable time for a real party in interest to join the action, the
court stated that it would dismiss this case with prejudice unless a real party in interest
ratified, joined, or substituted itself as plaintiff within fifteen days of the date of the April
17 order.2
On April 29, 2014, defendants purported to exercise their right under the Trust
and remove Schwartz as trust protector. On May 2, 2014, Schwartz purported to appoint
McDevitt as a trustee of the Trust and McDevitt accepted the appointment. The same
day, Schwartz and McDevitt filed the present motion “to ratify and join in the
commencement of this action and/or to be substituted or added as party-plaintiff.” Pls.’
Mot. 1. Attached to this motion is a proposed first amended complaint. Id. Ex. C.
Defendants opposed this motion on May 19, 2014. Schwartz and McDevitt filed a reply
on May 30, 2014. The court had the benefit of the parties’ oral argument at a hearing
held on August 29, 2014. The matter is ripe for the court’s review.
1
The initial complaint also included Keith Wellin and Friendship Partners LP as
defendants. Schwartz later voluntarily dismissed both parties.
2
In an order dated August 14, 2014, the court denied Schwartz’s motion to amend
the April 17 order.
2
II. STANDARDS
Federal Rule of Civil Procedure 17(a)(1) states that “[a]n action must be
prosecuted in the name of the real party in interest.” “The meaning and object of the real
party in interest principle embodied in Rule 17 is that the action must be brought by a
person who possesses the right to enforce the claim and who has a significant interest in
the litigation.” Va. Elec. & Power Co. v. Westinghouse Elec. Corp., 485 F.2d 78, 83 (4th
Cir. 1973). Rule 17(a)(3) states that “[t]he court may not dismiss an action for failure to
prosecute in the name of the real party in interest until, after an objection, a reasonable
time has been allowed for the real party in interest to ratify, join, or be substituted into the
action.”
Rule 15(a)(1) of the Federal Rules allows a party to amend its complaint once as a
matter of course within 21 days of serving the complaint, or within 21 days after service
of a motion to dismiss. Fed. R. Civ. P. 15(a)(1). In all other cases, a party may amend its
complaint “only with the other party’s written consent or the court’s leave.” Fed. R. Civ.
P. 15(a)(2). The Federal Rules instruct courts to “freely give leave when justice so
requires.” Id. However, “[d]isposition of a motion to amend is within the sound
discretion of the district court. A motion to amend under Rule 15(a) may be denied
where the motion has been unduly delayed and where allowing the amendment would
unduly prejudice the non-movant.” Deasy v. Hill, 833 F.2d 38, 40 (4th Cir. 1987)
(citations omitted).
III. DISCUSSION
It is well-settled that a trustee is a real party in interest with capacity to bring a
lawsuit on behalf of a trust. See Fed. R. Civ. P. 17(a)(1) (“The following may sue in their
3
own names without joining the person for whose benefit the action is brought: (E) a
trustee of an express trust.”); S.D. Codified Laws § 55-1A-32 (“A trustee may prosecute
or defend actions, claims or proceedings for the protection of trust assets or of himself in
the performance of his duties.”); S.D. Codified Laws § 15-6-17(a) (“A . . . trustee of an
express trust . . . may sue in his own name without joining with him the party for whose
benefit the action is brought . . . .”). Whether McDevitt is a proper plaintiff depends on
whether he is a duly appointed trustee of the Trust. That issue, in turn, depends on
whether Schwartz was validly acting as trust protector when he appointed McDevitt as a
trustee.
Defendants argue that because they exercised their right under the Trust to
remove Schwartz as trust protector on April 29, 2014, he had no authority to appoint
McDevitt as a trustee on May 2, 2014. Defs.’ Resp. 2. Schwartz contends that that the
purported removal was procedurally improper because defendants failed to appoint a new
trust protector when removing him, and that therefore his appointment of McDevitt was
valid.
The Trust provides that “[t]here shall always be a Trust Protector for each
separate trust.” Trust Art. VI.A. After purporting to remove Schwartz as trust protector
on April 29, 2014, defendants did not appoint a new trust protector until July 18, 2014.
Defendants make two arguments for why their removal of Schwartz was proper even
though they did not immediately appoint a successor trust protector. Defendants first
contend that the Trust does not require simultaneous replacement of the trust protector.
Notwithstanding the fact that the plain language of the Trust seemingly requires
instantaneous replacement, even assuming that simultaneous replacement is not required,
4
defendants’ nearly three-month delay certainly violates the clearly manifested intent of
Article VI. See In re Estate of Stevenson, 605 N.W.2d 818, 821 (S.D. 2000) (“In
interpreting a trust instrument, we must first attempt to ascertain and give effect to the
settlor’s intention . . . . If that intention is clearly manifested by the language of the [trust
instrument], it is the duty of this court to declare and enforce it.” (citation and internal
quotation marks omitted)).
Defendants also argue that the Trust contemplates periods with no trust
protector. Specifically, they point to the following passage:
The Trust Protector acting from time to time, if any, on his or her own
behalf and on behalf of all successor Trust Protectors, may at any time
irrevocably release, renounce, suspend, or modify to a lesser extent any or
all powers and discretions conferred under this instrument by a written
instrument delivered to the Trustee.
Trust Art. VI.A.8 (emphasis added). As an initial matter, it appears ambiguous whether
the “if any” language applies to the existence of a trust protector or the times at which the
trust protector may act. The fact that the phrase immediately follows “time to time”
strongly suggests that the parties intended “if any” to apply to the times at which the trust
protector may act. Notably, none of the other sections pertaining to the trust protector
include the “if any” modifier. See Trust Art. VI.A. Regardless, as discussed above, even
if the Trust did contemplate some period of time without a trustee, the nearly three-month
delay clearly violated the plain language of the Trust requiring there to be a trust
protector at all times.
5
Defendants’ removal of Schwartz was procedurally invalid because they violated
the terms of the Trust by not appointing a new trust protector when removing Schwartz.3
Therefore, Schwartz’s appointment of McDevitt as a trustee was valid, and McDevitt is a
proper plaintiff for this lawsuit. In his motion, Schwartz attempts to “reserve[] all rights
to prosecute this action as a party-plaintiff.” Pls.’ Mot. 14. This court has already, on
two occasions, extensively considered whether Schwartz is a real party in interest and
concluded that he is not. As a result, the court will substitute McDevitt for Schwartz as
plaintiff in this action.
III. CONCLUSION
For these reasons, the court GRANTS plaintiff’s motion and SUBSTITUTES
McDevitt for Schwartz as the plaintiff in this action. The court also GRANTS McDevitt
leave to amend his complaint.
AND IT IS SO ORDERED.
DAVID C. NORTON
UNITED STATES DISTRICT JUDGE
October 9, 2014
Charleston, South Carolina
3
Since defendants’ removal of Schwarz was invalid because they failed to
appoint a new trustee, the court need not consider whether Schwartz’s November 2013
amendment, which purports to change the procedure for removing the trust protector, is
valid.
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?