U.S. Supreme Court PRINCESS LIDA OF THURN AND TAXIS v. THOMPSON, 305 U.S. 456 (1939)

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trustee should be filled by the remaining trustees, and that application to the Court of Common Pleas to appoint a new trustee should only be made in the event the trustees in office could not agree on the appointment of a successor, it appears that from time to time trustees presented their resignations to that court and the court purported to accept them. And when the remaining trustees appointed new trustees to fill vacancies they reported their action to the court which sometimes purported to confirm and ratify that action. The record does not disclose that the first method provided in the agreement for filling vacancies ever was impracticable, or that there was occasion for resort to the court. The petitioners contend that in the circumstances, the court's approval was unnecessary and did not amount to an assumption of jurisdiction. We find it unnecessary to pass upon the contention.

Third. The important questions are whether the filing of the trustees' account on July 7, 1930, gave the Common Pleas Court jurisdiction, and, if so, what was the nature and extent of that jurisdiction. The Court of Common Pleas is given 'the jurisdiction and powers of a court of chancery, so far as relates to: ... The control, removal and discharge of trustees, and the appointment of trustees, and the settlement of their accounts.' [Footnote 2] Respecting the character of the jurisdiction conferred by a statutory grant so phrased the Supreme Court of Pennsylvania has said: 'The scope of supervisory control of necessity includes any matter which concerns the integrity of the trust res-its administration, its preservation, and its disposition and any other matter wherein its officers (trustees) are affected in the discharge of their duties.' 3 This jurisdiction is vested

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in the Court of Common Pleas of the county in which 'any such trustee shall have resided at the commencement of the trust.' 4 Two of the original trustees named in the agreement were residents of Fayette County. Two methods are provided for invoking the jurisdiction with respect to the administration of the trust. The court may cite the trustee on the application of any person in interest to 'exhibit an account of the management of the trust estate.' [Footnote 5] The trustee may, on the other hand, obtain an adjudication of his management of the trust by filing his account in the office of the prothonotary of the court and, upon such filing, proceedings are to be had in the same manner as if he had filed the account under compulsion. [Footnote 6] The trustee is permitted to have an adjudication of his stewardship in this manner every three years. [Footnote 7]

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court has the power to fix the compensation of the trustee,8 to require him to take over from the trust investments improperly made and to restore the amount expended for them to the trust estate,9 to surcharge him with losses incurred, to allow him his proper expenses, to find against him a balance due the estate, and to make the balance found due a lien upon his real estate. [Footnote 10] In the case of a continuing trust such as that here in question, after adjudication, the corpus is reawarded to the trustee for further administration in accordance with the terms of the trust. In the case of an account filed at the close of administration the court has power to decree distribution to the parties entitled. Under the equity powers conferred upon it the court may enforce its orders against a trustee by attachment for contempt. [Footnote 11] The jurisdiction extends to a trust like the present created by deed or voluntary agreement. 12 The audit and confirmation of the account is to be had after advertisement and other forms of notice and is binding on all those anywise interested in the estate who have had the required statutory notice of the audit. [Footnote 13] The parties in in-

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terest are permitted by exception and objection to the account to raise all pertinent questions respecting the management of the trust, and to invoke the powers of the court over the subjects above mentioned. [Footnote 14] The audit will further disclose whether there be probable ground for the removal of the trustee and the appointment of another in his place and if that be done the court has jurisdiction to compel the removed trustee to transfer the trust assets to his successor.

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of the District Court's jurisdiction, for it is settled that where the judgment sought is strictly in personam, both the state court and the federal court, having concurrent jurisdiction, may proceed with the litigation at least until judgment is obtained in one of them which may be set up as res judicata in the other. [Footnote 15] On the other hand, if the two suits are in rem, or quasi in rem, so that the court, or its officer, has possession or must have control of the property which is the subject of the litigation in order to proceed with the cause and grant the relief sought the jurisdiction of the one court must yield to that of the other. 16 We have said that the principle applicable to both federal and state courts that the court first assuming jurisdiction over property may maintain and exercise that jurisdiction to the exclusion of the other, is not restricted to cases where property has been actually seized under judicial process before a second suit is instituted, but applies as well where suits are brought to marshal assets, administer trusts, or liquidate estates, and in suits of a similar nature where, to give effect to its jurisdiction, the court must control the property. [Footnote 17] The doctrine is necessary to the harmonious cooperation of federal and state tribunals. [Footnote 18] While it has no application to a case in a federal court based upon diversity of citizenship, wherein the plaintiff seeks merely an adjudication of his right of his interest as a basis of a claim against a fund in the possession of a state court,19 this is

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not such a case. No question is presented in the federal court as to the right of any person to participate in the res or as to the quantum of his interest in it. The contentions are solely as to administration and restoration of corpus.

Petitioners insist that Shelby v. Bacon, 10 How. 56, is conclusive that, under the law of Pennsylvania, the filing of an account on July 7, 1930, did not constitute the institution of a suit by the trustees, did not confer exclusive jurisdiction on the state court and did not bar the subsequent institution of a suit in the federal court for the same relief. In this we think they are in error. What was there said by this court to the effect that the filing of an account in the state court did not constitute a suit and did not confer jurisdiction on the state court, was not necessary to the decision and is not in accord with the law of Pennsylvania as declared by its own Supreme Court. [Footnote 20] Assuming, however, that the state court had jurisdiction, this court held merely that the plaintiff had a right to establish his claim by suit in the Circuit Court notwithstanding the State court's jurisdiction over the trust. The court was careful to say that it was unnecessary to consider questions which might arise in the exercise of the jurisdiction of the federal court. The decision is in entire accord with many cases which hold that an action in the federal court to establish the validity or the amount of a claim constitutes no interference with a state court's possession or control of a res.

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Pennsylvania is without jurisdiction of the suit subsequently brought for the same relief, and the petitioners were properly enjoined from further proceeding in that court.

The judgment is affirmed. Footnotes

Footnote 1 Thompson v. Fitzgerald, 329 Pa. 497, 198 A. 58.

Footnote 2 Act of June 16, 1836, P.L. 784, 13, 17 P.S. 281.

Footnote 3 Wilson v. Board of Directors of City Trusts, 324 Pa. 545, 551, 188 A. 588, 592.

Footnote 4 Act of June 14, 1836, P.L. 628, 15, 20 P.S. 2741; 16, 20 P.S . 2872; 23, 20 P.S. 2767; Act of May 1, 1861, P.L. 680, 1, 20 P.S . 2871.

Footnote 5 Act of June 14, 1836, P.L. 628, 19, 20 P.S. 2833.

Footnote 6 Act of June 14, 1836, P.L. 628 14, 20 P.S. 2925.

Footnote 7 'All trustees of estates ... may hereafter, triennially, from the date of their appointment, file their accounts in the appropriate courts, which shall be duly audited, and confirmed absolutely to that date: ... provided further, That due and actual notice shall have been given, where the account shall be filed by a trustee, to all persons interested in the estate, under the terms and provisions of the trust; ... and that advertisement shall have been duly made of the filing of said account; and that such persons, actually notified, are legally competent and qualified, either personally or by their guardians, to appear in court and object to said account if they so desire.' Act of May 3, 1909, P.L. 391, 1, 20 P.S . 2853.

Footnote 8 Act of June 14, 1836, P.L. 628, 29, 20 P.S. 3271.

Footnote 9 See the opinion below, 329 Pa. 497, 512, 198 A. 58.

Footnote 10 Act of April 30, 1855, P.L. 386, 1, 20 P.S. 2854.

Footnote 11 Chew's Appeal, 44 Pa. 247; Scott v. Jailer, 1 Grant Cas., Pa., 237; Morrison v. Blake, No. 1, 33 Pa.Super. 290, 297; Commonwealth v. Heston, 292 Pa. 63, 68, 140 A. 533.

Footnote 12 See Baskin's Appeal, 34 Pa. 272; Jones' Estate, 15 Pa.Dist.R. 30; In re Weiser Trust, 23 York Leg.Rec.,Pa., 80; In re Ball's Estate, 220 Pa. 399, 69 A. 817.

Footnote 13 The petitioners lay stress on an averment in the answer filed in the Common Pleas Court to the trustees' petition for a rule to show cause why the petitioners should not be restrained from prosecuting their suit in the federal court. This is to the effect that the trustees' accounts had been 'filed without notice to the' petitioners. No notice of the intention to file is required. Notice is to be given to the parties in interest that the account has been filed and will be audited. There is no averment that the beneficiaries of the trust did not receive such notice.

Footnote 14 Compare Moore's Appeal, 10 Pa. 435; McLellan's Appeal, No. 1, 76 Pa. 231; Com. v. Trout, 76 Pa. 379.

Footnote 15 Penn General Casualty Co. v. Pennsylvania, 294 U.S. 189, 195, 55 S. Ct. 386, 388, and cited cases.

Footnote 16 Penn General Casualty Co. v. Pennsylvania, , 55 S.Ct. 386.

Footnote 17 Farmers' Loan & Trust Co. v. Lake Street E.R. Co., 177 U.S. 51, 61, 20 S.Ct. 564, 568; Palmer v. Texas, 212 U.S. 118, 129, 29 S. Ct. 230, 233; United States v. Bank of New York &c. Co., 296 U.S. 463, 477, 56 S.Ct. 343, 347.

Footnote 18 United States v. Bank of New York & Trust Co., supra, 478, 56 S.Ct. 347, and cases cited.

Footnote 19 Commonwealth Trust Co. v. Bradford, 297 U.S. 613, 619, 56 S.Ct. 600, 602, and cases cited.

Footnote 20 Whitney's Appeal, 22 Pa. 500, 505.