Hall et al v. Hall et al

DISTRICT COURT OF THE VIRGIN ISLANDS
DIVISION OF ST. THOMAS AND ST. JOHN
ETHLYN LOUISE HALL,
Individually, and ETHLYN LOUISE
HALL, as TRUSTEE of the ETHLYN
LOUISE HALL FAMILY TRUST,
Plaintiff,
v.
SAMUEL H. HALL, Jr. and HALL &
GRIFFITH, P.C.,
Defendants.
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) 	Civil No. 2011-54
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ATTORNEYS:
Andrew C. Simpson, Esq.
Law Offices of Andrew Simpson
St. Croix, U.S.V.I.
For the plaintiff.
Robert L. King, Esq.
Law Offices of Robert L. King
St. Thomas, U.S.V.I.
For the defendantS.
MEMORANDUM OPINION
GÓMEZ, C.J.
Before the Court is the motion, filed by Ethlyn Louise
Hall, individually and as Trustee of the Ethlyn Louise Hall
Family Trust, for reconsideration of the Court’s March 29, 2012,
order dismissing this matter for lack of subject matter
jurisdiction.
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I. 	FACTUAL AND PROCEDURAL BACKGROUND
At all material times, until approximately April 19, 2002,
Ethlyn Louise Hall (“Mrs. Hall”)1 was the owner of the plot of
land known as Parcel 17, Estate Peter Bay, St. John, U.S.V.I.
(“the Property”). On or about April 19, 2002, Mrs. Hall
subdivided the Property into seven separate sub-plots, Parcels
17-1 through 17-7. Mrs. Hall transferred ownership of certain of
the plots to her children and grandchildren as gifts.
Specifically, she executed a Deed of Gift, granting to her son,
Attorney Samuel H. Hall, Jr. (“Attorney Hall”)2, the real
property described as:
Parcel 	No. 	17-5, 	Estate 	Peter 	Bay, 	No. 	2aa 	Maho 	Bay
Quarter, 	St. 	John, 	U.S. 	Virgin 	Islands 	consisting 	of
1.161 acre, more or less.
(“Parcel 17-5”). She also made the following gifts:
Parcel 17-2 to her daughter, Elisa Hall;
Parcel 17-4 to her daughter, Phyllis Hall Brin; and
Parcel 17-6 to her granddaughter, Yassin Hall Young.
(“the Gifts”). Attorney Hall represented his mother in the
aforementioned transactions, drawing up the legal documents to
accomplish the gifts and recording the same.
1 Mrs. Hall was born on June 6, 1916. She was 94 years old as of the date that
the Complaint was filed.
2 At all relevant times, until sometime in 2010, Attorney Samuel H. Hall, Jr.,
Mrs. Hall’s son, served as Mrs. Hall’s attorney.
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From April 19, 2002, until approximately December 15, 2010,
Mrs. Hall was the owner of the plot of land known as Parcel 17-
7, Estate Peter Bay on St. John, U.S. Virgin Islands (“Parcel
17-7”).
On January 24, 2003, Mrs. Hall, as landlord, entered into a
Ground Lease (the “2003 Ground Lease”) with Andrews St. John
Trust (“Andrews”), as tenant. The lease was drafted by Attorney
Hall. Pursuant to the 2003 Ground Lease, Mrs. Hall leased Parcel
17-7 to Andrews for a period of fifty years. The lease provided
that Andrews was to design and build two cottages at Andrews’s
expense. One cottage was to be built on Parcel 17-6 (the “17-6
Cottage”). It would be owned by Yassin Hall Young. The other
cottage was to be built on Parcel 17-4 (the “17-4 Cottage”). It
would be owned by Phyllis Hall Brin.
The 2003 Ground Lease provided that, if the 17-6 Cottage
was not completed within two years from the date of the lease,
Andrews was to pay rent of $5,000 per month ($2,500 to Yassin
Hall Young and $2,500 to Phyllis Hall Brin), until the date of
completion. If the 17-4 Cottage was not completed within four
years of the date of the lease, Andrews was to pay $2,500 per
month to Phyllis Hall Brin until the date of completion.
Additionally, if the two cottages were not completed in the
requisite time, Mrs. Hall, Phyllis Hall Brin, and Yassin Hall
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Young retained the right to seek injunctive relief and to sue
for specific performance. The lease also provided that the three
of them would be granted a first priority lien on any
improvements constructed on Parcel 17-7 by Andrews, and on any
income derived by Andrews from the use and enjoyment of Parcel
17-7.
Also under the 2003 Ground Lease, Andrews was obligated to
reimburse Mrs. Hall for all property taxes on Parcel 17-7,
including all property taxes on any improvements thereon.
Attorney Hall collected the rent for his mother under the
2003 Ground Lease. He also managed the reimbursement of property
taxes and the construction of the cottages.
At some point in time during the term of the 2003 Ground
Lease, changes were made to the design of the 17-6 Cottage,
substantially increasing its size. Mrs. Hall was aware of the
changes, but alleges that she never agreed to pay the increased
costs that resulted therefrom.
On August 3, 2007, Attorney Hall drafted, and Mrs. Hall
allegedly signed, a document which allowed Attorney Hall to halt
or postpone construction on the 17-4 Cottage. The document
allowed Attorney Hall to redirect the rental income from the
2003 Ground Lease to be used instead for the construction of a
house on Parcel 17-5, owned by Attorney Hall. The document
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states that the consideration for allowing Attorney Hall to
redirect the rental income from the 2003 Ground Lease to his own
property was that Attorney Hall could “complete his home in
order to expedite his assistance of [Mrs. Hall] in [her] future
care on St. John.” (Compl. ¶ 38.)
On the following day, August 4, 2007, Mrs. Hall allegedly
signed a Power of Attorney in favor of Attorney Hall. The Power
of Attorney was not notarized. That same day, Attorney Hall
drafted, and Mrs. Hall allegedly signed, a document purporting
to be an Assignment of Interest. Pursuant to the document, Mrs.
Hall signed all of her interest in the 2003 Ground Lease to
Attorney Hall in consideration for his “assistance with her
future care and upkeep.” (Compl. ¶ 39.)
On August 13, 2008, Mrs. Hall allegedly signed another
Power of Attorney in favor of Attorney Hall. The document was
notarized by Attorney Hall’s law partner, Marie Thomas-Griffith.
Mrs. Hall has no recollection of executing or intending to
execute either Power of Attorney.
In August of 2010, Mrs. Hall sent letters to Attorney Hall
requesting that he provide her with a complete accounting of her
financial obligations with regard to Parcel 17-7. She also
requested that Attorney Hall provide her with information
regarding the reimbursement of property taxes paid on Parcel 17-
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7. Attorney Hall did not respond to Mrs. Hall’s requests for
information.
Thereafter, Mrs. Hall became aware that, on or about
October 28, 2009, Attorney Hall, purporting to act “individually
and as attorney-in-fact for” Mrs. Hall, entered into an “Early
Termination of Lease, Mutual Release and Estoppel Certificate”
(the “Release”), with Andrews. The Release discharged Andrews of
any further obligation under the terms of the 2003 Ground Lease.
Mrs. Hall alleges that she was neither aware of, nor did she
otherwise consent to or approve of the transaction at the time
that Attorney Hall purportedly undertook it on her behalf.
Mrs. Hall also became aware that Attorney Hall, purporting
to act as her attorney-in-fact, entered into a lease agreement
dated December 2, 2008 (the “2008 Lease”), with the Talton
Family Trust (“Talton”). Under the 2008 Lease, Parcel 17-7 was
leased to Talton for a period of 75 years, with the rent payment
to be made in an $800,000 lump sum. The lump sum was payable to
Attorney Hall, as “agent and attorney in fact” for Mrs. Hall.
(Compl. ¶ 52.) The lease agreement obligated Talton to reimburse
Mrs. Hall for all property taxes on Parcel 17-7. Mrs. Hall
asserts that she was neither aware of, nor did she otherwise
consent to or approve of this transaction at the time that
Attorney Hall purportedly undertook it on her behalf.
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On December 15, 2010, Mrs. Hall created the Ethlyn Louise
Hall Family Trust (“the Trust”). Also on that date, Mrs. Hall
transferred all of her property to the Trust. Mrs. Hall named
herself the sole trustee of the Trust.
Subsequently, Mrs. Hall received a letter from Attorney
Hall, dated February 1, 2011. The letter informed Mrs. Hall that
the 2008 Lease generated a capital gain in 2010 totaling
$1,070,000. The letter explained that the capital gain was
subject to a capital gains tax of 15%. In the letter, Attorney
Hall stated that Mrs. Hall must pay the capital gains tax in the
full amount. He explained that he and others who benefited from
the capital gains would thereafter reimburse Mrs. Hall for their
respective shares which were received as “gifts” from Mrs. Hall.
Thereafter, on May 9, 2011, Mrs. Hall, individually and as
Trustee of the Ethlyn Louise Hall Family Trust (the “Trust”),
filed a six-count complaint against Attorney Hall and his law
firm, Hall and Griffith, P.C. Count One alleges a claim for
breach of fiduciary duty against Attorney Hall. Count Two
alleges a claim for legal malpractice against Attorney Hall and
Hall & Griffith, P.C. Count Three alleges an action for fraud
against Attorney Hall. Count Four asks the Court to order an
accounting. Count Five asks the Court to establish a
constructive trust for allegedly diverted proceeds and other
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monies. Count Six requests that the Court impose an equitable
lien on Parcel 17-5. The Complaint asserts that Attorney Hall,
and Hall & Griffith, P.C., are citizens of the Virgin Islands.
(Compl. ¶ 6.) It asserts that Mrs. Hall is a citizen of Florida.
(Compl. ¶ 3.) The complaint does not assert the citizenship of
the Trust.
In order to determine whether there was diversity of
citizenship, on March 2, 2012, the Court ordered Mrs. Hall to
file a list of all of the trustees and beneficiaries of the
Trust and to identify their citizenship. The Court then ordered
Mrs. Hall to file the Trust’s establishing documents (the
“Declaration of Trust”) with the Court. Mrs. Hall filed the
Declaration of Trust with the Court for in camera review on
March 16, 2012.
Thereafter, on March 29, 2012, the Court issued an order in
which it found the requisite diversity of citizenship lacking.
The Court thus dismissed this matter for lack of subject matter
jurisdiction.
On the following day, Mrs. Hall filed a timely motion for
reconsideration of the Court’s March 29, 2012, order dismissing
this matter. Attorney Hall and the defendant law firm oppose.
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II. DISCUSSION
Motions for reconsideration are governed by Local Rule of
Civil Procedure 7.3 which provides:
A 	party 	may 	file 	a 	motion 	asking 	the 	Court 	to
reconsider 	its 	order 	or 	decision. 	Such 	motion 	shall
be 	filed 	within 	fourteen 	(14) 	days 	after 	the 	entry 	of
the 	order 	or 	decision 	unless 	the 	time 	is 	extended 	by
the 	Court. 	Extensions 	will 	only 	be 	granted 	for 	good
cause 	shown. 	A 	motion 	to 	reconsider 	shall 	be 	based
on:
1. intervening change in controlling law;
2. availability of new evidence, or;
3. 	the 	need 	to 	correct 	clear 	error 	or 	prevent
manifest injustice.
LRCi 7.3 (2009); see also Max’s Seafood Café by Lou-Ann, Inc. v.
Quinteros, 176 F.3d 669, 677 (3d Cir. 1999) (citing North River
Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir.
1995)).
Motions for reconsideration are not substitutes for
appeals, and are not to be used as “a vehicle for registering
disagreement with the court’s initial decision, for rearguing
matters already addressed by the court, or for raising arguments
that could have been raised before but were not.” Bostic v. AT&T
of the V.I., 312 F. Supp. 2d 731, 733 (D.V.I. 2004).
A motion for reconsideration, which is filed within twenty
eight days of the underlying order, is considered a motion to
alter or amend the judgment under Rule 59(e) of the Federal
Rules of Civil Procedure. Rankin v. Heckler, 761 F.2d 936, 942
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(3d Cir. 1985)(“Regardless how it is styled, a motion filed
within ten3 days of entry of judgment questioning the correctness
of a judgment may be treated as a motion to alter or amend the
judgment under 59(e)”).
The 	purpose 	of 	a 	motion 	for 	reconsideration 	is 	to
correct 	manifest 	errors 	of 	law 	or 	fact 	or 	to 	present
newly 	discovered 	evidence. 	A 	proper 	Rule 	59(e) 	motion
therefore 	must 	rely 	on 	one 	of 	three 	grounds: 	(1) 	an
intervening 	change 	in 	controlling 	law; 	(2) 	the
availability 	of 	new 	evidence; 	or 	(3) 	the 	need 	to
correct 	clear 	error 	of 	law 	or 	prevent 	manifest
injustice.
Lazaridis v. Wehmer, 591 F.3d 666, 669 (3d Cir. 2010).
III. ANALYSIS
In the motion to dismiss underlying this motion for
reconsideration, Attorney Hall argued that the Court lacks
subject matter jurisdiction because complete diversity of
citizenship is lacking. As such, it was necessary for the Court
to determine the citizenship of each of the parties.
The Supreme Court of the United States has long held that
the only relevant citizenship for diversity purposes is that of
the “real parties to the controversy.” Navarro Sav. Ass’n v.
Lee, 446 U.S. 458, 460-61 (1980) (citing McNutt v. Bland, 43
U.S. 9, 14-15 (1844)). “Thus, a federal court must disregard
3 At the time Rankin was decided, Rule 59(e) required a motion to alter or
amend a judgment to be filed within ten days of the entry of judgment. The
Rule was amended effective December 1, 2009, to change the time for filing a
timely motion to alter or amend judgment from 10 days to 28 days.
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nominal or formal parties and rest jurisdiction only upon the
citizenship of real parties to the controversy.” Navarro, 446
U.S. at 461 (citing McNutt, 43 U.S. at 14; 6 C. Wright & A.
Miller, Federal Practice and Procedure § 1556, pp. 710-711
(1971)).
“The real party in interest rule ensures that under the
governing substantive law, the plaintiffs are entitled to
enforce the claim at issue.” HB General Corp. v. Manchester
Partners, L.P., 95 F.3d 1185, 1196 (3d Cir. 1996) (citations
omitted). A court must look to the pleadings in determining
whether a plaintiff is entitled to enforce the claim at issue.
See generally Swanson v. Bixler, 750 F.2d 810 (10th Cir. 1984)
(reviewing the allegations in the complaint to determine whether
the plaintiff was the real party in interest).
On the face of the pleadings, for jurisdictional purposes,
there appear to be two possible parties in interest — the Trust
and Mrs. Hall.4 If the Trust is the real party in interest, the
Court must “look to the citizenship of both the trustee and the
beneficiary . . .” Emerald Investors Trust v. Gaunt Parsippany
Partners, 492 F.3d 192, 203 (3d Cir. 2007). That is, the
citizenship of both Mrs. Hall and the beneficiaries of the Trust
4 While not dispositive, the Court notes that the Trust was not in existence
at the time that many of the facts alleged in the complaint transpired.
Indeed, the Trust was created on December 15, 2010. The events which gave
rise to the complaint occurred between April, 2002, and August, 2010.
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must be considered. If, however, Mrs. Hall is determined to be
the real party in interest, then her citizenship alone controls.
In undertaking that analysis, the Court will look to each claim
asserted in the Complaint.
Count One of the complaint alleges breach of fiduciary
duty, “[b]y virtue of Defendant Hall’s attorney-client
relationship with Ethlyn Louise Hall . . .” (Compl. ¶ 66)
(emphasis added). The real party in interest for a breach of
fiduciary duty claim is the party to whom the duty was owed.
Compare Labovitz v. Washington Times Corp., 172 F.3d 897 (D.C.
Cir. 1999) (finding that the plaintiff was the real party in
interest to pursue a claim for breach of fiduciary duty because
the injury arose from a duty owed to the plaintiff) with G&S
Holdings LLC v. Continental Cas. Co., 697 F.3d 534 (7th Cir.
2012) (finding that plaintiffs whose claims arose from duties
owed not to them, but to a third party, were not real parties in
interest), and Weissman v. Weener, 12 F.3d 84, 87 (7th Cir.
1993) (holding that a party whose injury is derivative, rather
than direct, is not the real party in interest), and Swanson v.
Bixler, 750 F.2d 810, 814 (10th Cir. 1984) (finding that the
plaintiff was not the “real party in interest” under Rule 17(a)
where he alleged that a fiduciary duty owed to a third party,
not to him, was breached).
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Here, the complaint alleges that Attorney Hall served as
Mrs. Hall’s attorney. (Compl. ¶ 66.) It alleges that Attorney
Hall, as Mrs. Hall’s attorney, had a fiduciary duty to act in
Mrs. Hall’s best interests. (Compl. ¶ 68.) It also alleges that
Attorney Hall breached his fiduciary duty to Mrs. Hall by
engaging in certain actions.
The complaint, however, does not allege that a fiduciary
relationship existed between Attorney Hall and the Trust. It
does not allege that a fiduciary relationship existed between
Attorney Hall and any of the Trust’s beneficiaries. Similarly,
it does not allege that Attorney Hall owed any fiduciary duty to
the Trust or to its beneficiaries. Any attempt by the Trust to
assert a cause of action for breach of fiduciary duty would be
on behalf of Mrs. Hall, a third party. As such, the Court finds
that the Trust is not the real party in interest as to the
breach of fiduciary duty claim.
Count Two alleges legal malpractice, averring that “[i]n
rendering legal services to Ethlyn Louise Hall, Defendant Hall
and Griffith, P.C. failed to exercise reasonable care and skill
and negligently advised Ethlyn Louise Hall to enter into the
2003 Ground Lease . . .” (Comp. ¶ 74) (emphasis added). To
succeed on a claim for legal malpractice “the plaintiff has the
burden of proving 1) the attorney-client relationship giving
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rise to a duty; 2) breach of that duty; 3) the causal connection
between the negligent conduct and the resulting injury, and 4)
actual loss or damage.” Moorehead v. Miller, 102 F.R.D. 834, 838
(D.V.I. 1984).
As previously discussed, the complaint alleges only that
Attorney Hall owed Mrs. Hall, and not the Trust or its
beneficiaries, a duty arising from an attorney-client
relationship. Because Attorney Hall is not alleged to have owed
such a duty to the Trust or its beneficiaries, the Court finds
that the Trust is not the real party in interest for the purpose
of the legal malpractice claim.
Count Three alleges fraud, contending that “Defendant Hall
induced Ethlyn Louise Hall to sign documents purporting to
reprogram funds from the 2003 Ground Lease for his benefit and
induced her into assigning her interest in the 2003 Ground Lease
to him by instructing her, in his capacity as her attorney, that
she needed to sign the documents.” (Compl. ¶ 79) (emphasis
added). “In the Virgin Islands, a fraudulent inducement claim
has essentially the same elements as common law fraud.” Fitz v.
Islands Mechanical Contractor, Inc., Civil No. 2008-60, 2010 WL
2384585, *9 (D.V.I. June 9, 2010) (citations omitted). “A
plaintiff adequately pleads a common law fraud claim by alleging
(1) a false representation of material fact, (2) the defendant's
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intent that the statement be acted upon, (3) reliance upon such
a statement by the persons claiming to have been deceived, and
(4) damages.” Beachside Associates, LLC v. Okemo Ltd. Liability
Co., 2008 WL 5455402, *2 (D.V.I. Dec. 31, 2008) (internal
quotations and citations omitted) (emphasis added).
Here, the complaint alleges that Mrs. Hall was deceived, in
her individual capacity. It does not allege that the
beneficiaries of the Trust were deceived. It does not allege
that Mrs. Hall was deceived while acting on behalf of the Trust
in her capacity as Trustee. As such, the Court finds that Mrs.
Hall, rather than the Trust, is the real party in interest for
the purpose of the fraudulent inducement claim.
Counts Four, Five, and Six are not actual causes of action.
They simply request, respectively, an accounting; establishment
of a constructive trust; and imposition of an equitable lien,
all arising from the conduct outlined in Counts One, Two, and
Three. There is no conduct alleged in Counts Four through Six
which implicates either the Trust or its beneficiaries. Thus,
the Court finds that the Trust is not the real party in interest
as to Counts Four, Five, and Six.
The Trust is not the real party in interest as to any of
the claims asserted in the complaint. Indeed, the Trust is
merely a nominal party. While the Trust may have some derivative
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or successor interest in the outcome of this matter, it is
certainly not the real party in interest. Because the Trust is
not the real party in interest, the Court need not look to the
Trust’s citizenship for the purpose of determining whether
diversity jurisdiction is proper. See Navarro, 446 U.S. at 461
(“a federal court must disregard nominal or formal parties and
rest jurisdiction only upon the citizenship of real parties to
the controversy.”) Specifically, the Court does not have to look
to the citizenship of the Trust’s beneficiaries. Cf. Emerald,
492 F.3d at 203 (explaining that a court should “look to the
citizenship of both the trustee and the beneficiary” when the
trust the party suing or being sued).
Furthermore, even if the Trust were more than a nominal
party, the Court’s conclusion would be the same.5 Indeed, in
Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 464 (1980), the Supreme
Court of the United States explained that “a trustee is a real
party to the controversy for purposes of diversity jurisdiction
when he possesses certain customary powers to hold, manage, and
dispose of assets for the benefit of others.” The Navarro court
5 At the time the Court issued its March 29, 2012, order dismissing this
matter, the issue placed before it was whether the Trust’s citizenship should
be determined by looking to the citizenship of the Trustee, alone, or the
citizenship of both the Trustee and the beneficiaries of the Trust. The Court
then focused on applying the holding in Emerald Investors Trust v. Gaunt
Parsippany Partners, 492 F.3d 192 (3d Cir. 2007), to the facts of this case.
That focus was too narrow. Given the presence of a nominal party, the Court’s
inquiry now necessarily must be expanded.
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further explained that when a trustee is a real party to the
controversy, such trustees “are entitled to bring diversity
actions in their own names and upon the basis of their own
citizenship. Federal Rule of Civil Procedure 17(a) now provides
that such trustees are real parties in interest for procedural
purposes.” Id. at 462 (internal citations omitted).
Here, according to the Trust’s establishing documents (the
“Declaration of Trust”), Mrs. Hall is the grantee and trustee of
the Trust. Also according to the Declaration of Trust, “all
rights to all income, profits and control of the trust property
shall be retained by the grantor. Grantor retains the right to
sell any or all of the trust property during her lifetime.”
(Declaration of Trust.) Thus, under Navarro it is clear that
Mrs. Hall, as grantee and Trustee of the Trust, “possesses
certain customary powers to hold, manage, and dispose of assets
for the benefit of others.” 446 U.S. at 462. Consequently, Mrs.
Hall, as Trustee of the Trust, would still be entitled to bring
this diversity action in her own name and upon the basis of her
own citizenship. Id. As such, that Mrs. Hall also brought this
action in her capacity as Trustee does not change this Court’s
conclusion.
Certainly, as pointed out above, Mrs. Hall does not allege
in her complaint any injury to the Trust itself, or to the
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beneficiaries of the Trust. All of the injury complained of
stems from the fiduciary relationship between Mrs. Hall and
Attorney Hall. Mrs. Hall in her capacity as Trustee is merely a
nominal party to this action. As such, the Court will look only
to the citizenship of Mrs. Hall in her individual capacity. See
Navarro, 446 U.S. at 461.
The citizenship of the parties is not disputed. In the
complaint Mrs. Hall states that she is a “citizen of the State
of Florida.” (Compl. ¶ 3). Further, Mrs. Hall alleges in her
complaint, and Attorney Hall concedes, that he and his law firm
are citizens of the U.S. Virgin Islands. As such, the Court
finds that there exists the requisite diversity of citizenship
for the purpose of exercising subject-matter jurisdiction.
An appropriate order follows.
S\
Curtis V. Gómez
Chief Judge
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