Reply Brief of Petitioner — Grey v. First National Bank in Dallas

~~ LIBRARY

/ SUPREMG COURT. U, i

Iy THE ~~ T-JOHN F. DAVIS, C

= | | ; Supreme Court of the Anited State

3

OctoBer TERM, 19€8 ;

, S$ "No. 513

> or *

Cornelia O’Connor Grey, JAMES Custis GREY and

MicHaAEL CaRrER- ‘GREY, _ Pe

& Petitioners,

—\V.—

First Nationa, Banx in' Datias in its private capacity —

and as trustee of the O’Connor and Morgan trusts and

‘the, Attorney . General of Texas,

Respondents.

' ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES . ae

' COURT OF APPEALS FOR THE FIFTH CIRCUIT

?

REPLY BRIEF FOR PETITIONERS

7 = —=—=

GenaLp MEYER

Attorney for Petitioners

@ - 477 Madison Avenue’ |

° - New York, N. Y. 10022

Pe

ry

os

E| Leon ALEXANDROQFF

e * New A. Pottio

| of Counsel

“? Introduetion ; -

' pp. 9-6

PAGE

3 I—Respondent’s intitle to justify. the holding of

_ the Court below as to the meaning of the Dis-

trict Court’s:instruction°on the binding effect of

the state court judgment merely. highlight its

failure to meet* the standards of Rule 49(a).;

Callen is undistipguishable: an

- Tivdteapeniontie arguments in support of the hold- |

ing af the Court below as to the omission of a

.special issue with respect to failure to disclose

disregard the requirements of rule 49(a) ......:.....

| ~ TII—Respondent’s arguments in support of the- de-

cision below with respect to the District Court’s

_ refusal to answer the jury’s inquiry is refuted :

by the record -22.0/.....

ef

IV—The question of District Court’s bias and preju-

dice was presented to the Court below -............... -

f

"‘V—The purported representation of James and

Michael in the state court action by an attorney:

representing the conflicting interests of respon-

dent raises an- important question of due

process under the 14th Amendment

VI—Respondent’s contention that petitioners suf-

fered no damage and therefore are not entitled

to relief is untenable

~~

a I

ConcLUSION

Appenpix A—Petitioners’ brief in the\Court: below,

14

26°

ia

_PAGE

o Table of Authorities :

CaSEs eed

Brown v. Scherck, 393 S. W. 2d +172 24

Bryant v. Lewis, 27 S. W. 2d. 604................ eo ae

‘Callen v. Pennsylvania R. Co., 332 U. So G25 secew-un-6, 7) 27

-- Cooper v. Newell, 173 U-S. 555 AL ae ee

Duignan v. United States, 274 U.S. 195 i encnnnnenned 218

‘Eldridge § Vv. Eldridge, 299 Ss. W. 209 . if 6

First National Bank v. Cities Service Co., 391 Uz 8. es: 2:

z W. Hill & Son, Ine. v. Wilson, 399 S. W. 2d 152 ....... 17

Husty v. . United States, 282 U. S. 694 — 12

Int’ and @: N. R. R. Co. v. Stewart, 57 Tex. 166 ......... .

- International Longshoremen’s. Ass’n v. Philadelphia :

Marine Trade Ass’n, 389 U. S. 64 ... ee 2

" Johnson v. New York N. H. & H.R. Co., 344 U.$. 48.0 2

Lawn v. United States,-355 U. 8. 389 :eccceceiccwlenens 12

Layne & Bowles Corporation v. batsavasci Well Works, .

(261 U. S. 387 ..... : , 2

McMurry v. McMurry, 4S. W. 357 din wa oo

- Provident Tradesmen’s Bank v. Patterson, 390 U. S.

- 102 , nen ee ee

~ Ralls v. Ralls, 256 S, W. 688

Reed v. Bryant, 291 S. W. 605

Rice v. Sioux City Cemetery, 349 v. S. 70.

Schlazenhauf v. Holder, 379 JJ. S. 104

, Schneider v. Sellers, 61'S. W. 541 - |

‘ Sidran v. Tannenbaum, 391 S.-W. 2d 93 ..

State v. Wright, 56 S. W. 2d 900 !

W. &. Turnbow Petroleum Corp. v. aaa 199 S. Ww.

2d 263 | Ki -

U: 8. v. Jackson, 257°F. 24°41 | 11-12

STATUTES AND RULES

Rule 49(a) F. RB. G. P. eneeneeen Dy 5, 6, OT -

Article 7425(b)—4 (J) Tex. Rev. Civ. Stat. ... Aes

_ Article 7425(b)-—24 (C) Tex. Rev. Civ. Stat. .............. 23

| Article 7425(b)—24 (E) ‘Tex. Rev. Civ. Stat. ......... 2B

Committee Note to the 1966 Revision of Rule = aay

F. B.C. P. 3 2 *

Bogert, Trust and Trustees 2nd Ed. 6941, pp. 341-2 - 24

3 Scott on Trusts 3rd Ed. 6216.2 Sielacntinagh i

: the. Court of Appeals is final’ — the federal judicial

‘Is THE

_ Supreme Court of the United States

Pietra _ Octossn TeRM, 1968 - 4

| ee

~ CoRwELIA O'Connor G: °EY, on — GREY and

_ MicHarL — GREY, — arte

ean; Ve ae 7 Petitioners,

: —_—V.—. :

First Nationa, Bank iw Datias ‘in its private. capacity

and as trusteé of the O’Connor and Morgan trusts and. |

the Attorney General of Texas, | -

. | " Respondents:

REPLY’ BRIEF FOR PETITIONERS

__ Respondent Bank, speaking with three separate voices,’

opposes the granting of the petition on a variety of grounds

which would obscure the primary issue here involved in a'-

. ‘plethora of irrelevancies and inaccuracies. Respondent’s

_ contention, Arms. Br., pp. 5, 6, that the petition “is based |

primarily on procedural matters on which the’ decision of

1 Three separate briefs j in opposition have. been filed by different

lawyers acting on behalf of respondent Bank: the first, on pe

_ half of the Bank in its “private”, or “individual”, capacity,

inafter referred to as “Coke Br.”, the second, on behalf the

Bank as “successor trustee of the James Charles O’Connor’ trust”,

hereinafter referred to as “Brin Br.”, and the third, on behalf of

the Bank as “successor trustee of the Ivor O’Connor Morgan

"trast", hereinafter referred to as “Arms. Br.”

structure”, is, of course, wholly unfounded. See, e.g., First |

National Bank v. Cities Service Co., 391 U. S. 253 (1968);

Provident Tradesmen’s Bank vy. Patterson, 390 U. S.. 102 -.

(1968); International Longshoremen’s Assn. v. Philadel-

_ phia Marine Trade Assn., 389 U. S. 64 (1967); ‘Schlagen-

hauf v, Holder, 379 U. 8.104 (1964) ; Johnson v. New York,

N. H. &'H. R. Co., 344 U.S. 48 (1952).

Indeed, the increasing use of the “special verdict” pro-

cedures sanctioned by Rule 49(a) of the Federal Rules of

Civil Procedure, to which this Court appears never to have

spoken, and the utter confusion, if not the virtual denial yY

. ofthe right of fair trial, to which the untitored use of such |

procedures must, as it did in this case, inevitably lead,

point directly to the “importance to’ the public” of an au-

thoritative resolution by this Court of a “problem which is

beyond the academic or the episodic”, and which goes to

the very heart of the administration of justice by the fed-

eral courts. Layne & Bowles Corporation and Rice, loc. cit.,

Arm. Br,, pp. 5, 6.

Ya i L ,

Rule. 49(a) of the Federal Rules of Civil Procedure is

_ explicit that in requiring a jury to return special verdicts, = ~~

_ “[t}he Court shall give to the jury such explanation and |

instruction concerning-the matter thus submitted as may be

necessary to enable the jury to make its findings upon each

issue”. The first of the questions here is the soundness

of the decision of the Court below that in its charge to the

jury the District Court obeyed this injunction.

Petitioners have urged, Pet. 19-23, that the disputed. (

charge, Pet. 11; I R. 292, in effect withdrew from the jury

any question concerning the binding effect of the State

o-—

Court judgment insofar as concerned Mrs.’ Grey, and, in-

sofar as concerned James and’ Michael, left for the jury’s

determination only whether the attorney who purported to

appear for them in the State Court action “had authority

to do so. The Court’ below rejected petitioners’ contention,

liolding that the charge in question related merely to “the

issue of the State Court’s jurisdiction”, i.e, its personal

jurisdiétion over petitionérs, and that this “was completely

' separate from the issue” whether respondent “fraudulently .

obtained that judgment”. Pet: 11, 16(a); 393 F. 2d at 382.

- But what the District Court intended the jury to under-

stand by her charge, and what the jury understood it ta

mean are, at least, obscured by an abundance of ambigui-

ties. Thus, it will be observed that in instructing the jury

- with respect to the contentions of plaintiffs, i.e., petition-

ers here, I R. 291, the District Court made no mention of

petitioners’ basic contention that the State Court. judg-

ment was not binding on them because it had been obtained

by fraud. It will also be observed that in instructing the

. jury with respect to the “issues in this case for your de-

cision”, I. R. 292, the District Court makesii reference to

the basic issue whether the State Court judgment had been

induced by fraud, and was, therefore, not binding on peti-

_tioners. The only reference to petitioners’ contention with

respect to the State Court judgment appearing in the Dis-

trict Court’s instructions to the.jury, was that James and

Michael contended “that they did not authorize the em-

ployment” of the lawyer who purported to appear for them

ig that case. I R.@91. Moreover, while,the District Court

overruled respondent’s motions at bot end of the plain-

tiffs’, i.e., petitioners’ case, and at the end of the whole

’

fy

#

¥

case, IIT R. 1470, 1471; IV R. 1786, 1787; Pet. 9, 30, in

taking the earlier action, the “District Court said, III

R. 1471: |

I would like to say, however, that I am not aslae to

submit anything to, the jury with reference to the State.

‘Court case except the question of authority of Mr.

Kelton, and tliat really the effect of the submission

that I have in mind is that 1 am gffirming or saying

that the partition and sale is approved as far as Mrs.

Grey ‘and the O’Connor Trust is concerned, and that

the only thing I am submitting to the-jury is the i issue

of damages. [Emphasis supplied. ]

“The District Court then noted with rare sagacity that,

“T am not sure that I am making myself clear,” adding, —

IIT R. 1471,

“but I think that there are two reasons why there

are no grounds. for setting aside the partition—one

_ is that I do not think that it would be equitable to

do it, and the second is that it has been approved by

the State Court, and that the O’Connor Trust and

Mrs. Grey were represented, and the lawyers who

represented them were authorized to act, so that I

see nothing to submit to the jury as far as partition

and sales agreement is concerned. [Emphasis sup-

plied.)

? More prec dpely, at the end of plaintiffs’, i.c., petitioners’, case,

the District Court overruled defendant’s, i.e., respondent’s, mo-

tions for a directed verdict except the motion made in its capacity

as successor trustee of the Ivor O’Connor Morgan Trust, which

was granted because only equitable relief, was demanded with

respect to such trust. III R. 1467-1469. As already noted, Pet.

10, the District Court very early determined that there would be

no equitable relief. IV R. 1809, I R. 33.

.

5

With this as the District Court’s exposition and ex-

planation of what she intended to leave tothe jury, the

decision of the Court below is inexplieable.

Certainly, if the District Court intended to leave the

jury to understand that the State Court judgment was to

be disregarded by them if they found that it had been

obtained by fraud, she nowhere told them so in her charge.

In any event, iftthe disputed charge is, indeed, susceptible

of the very limited meaning attributed to it by the Court’

below, it is also clearly susceptible of the meaning peti-

tioners attribute to it, and which it would appear the

District Court actually had in mind. In this ambiguous

posture, the, instruction cannot meet the requirement of

Rule 49a) that the jury be given “such explanation and

instruction concerning the matter * * * submitted as may

be necessary to enable the jury to make its findings upon

each issue”. Respondent’s several oppositions to the peti-

tion make this clear.

In its “private” or “individual” capacity respondent

urges in opposition to the petition that the meaning attrib-

- uted by the Court below to the disputed instruction is

altogether correct in that “the charge as a whole” admits

of no other interpretation. Coke Br., pp. 8-10, 16, 17.

However, in its capacities as successor trustee of the

James O’Connor and Ivor O’Connor Morgan trusts, re-

spondent in effect takes the position that the State Court

judgment was not under Texas law open to petitioners’

“attack and, defends the disputed instruction on the ground

that there,was no issue in that regard properly to be sub-

mitted to the jury.’ Brin. Br., pp. 8-12; Arms. Br., pp. .

* Respondent’s exposition of the distinction betwéen “intrinsic”

and “extrinsic” fraud aa the basis for an attack on a, judgment

6

14, 15. But the standard established by Rule 49(a) for in- |

structions to a jury when special verdicts are required,

,is not met when in order ,jo ‘be understood, an instruc- ©

tion needs such explanations as the Court anew and the

respondent have advanced. '

Certainly, if the respondent’s own counsel in its several |

capacities can in good conscience advance divergent’ views

as to the significance of the disputed instruction, who

can say what it meant to the jury?

Respondent’s effort, Coke Br., p. 18, to distinguish

Callen, Pet. 21, 22, is unavailing. There the question was

under Texas law, Coke Br., p. 17, fn. 8; Brin. Br., pp. 8-12; Arms. .

Br., pp. 6-7, is wholly beside the point, for ‘the District Court is

eompletely silent on this score, and the Court below expressly

avoided the question on the ground that it was academic because

“the jury found ‘that the state court judgment was not procured

‘by fraud”. Pet. 12a, 13a, fn. 8; 393 F. 2d at 380, fn. 8. The

jury, however, did not so find, as no special verdict in that regard

was required of it. In any event, the jury’s special verdicts Nos.

2 and 3, to which the Court below refers, Pet. 12a, 393 F. 2d at

380, are clearly inconclusive, not only because of the ambiguity

of the questions as put by the District Court, but also because-if~

the jury understood the disputed ‘instruction as petitioners, and

respondent in two of its capacities do, the jury had no alternative

but to answer negatively. See Pet. 12, 13, 20, 21.

.Substantively, moreover, the applicable Texas authorities do not

support féspondent’s position. On the contrary, they make it clear

that’ under Texas law, an action to set aside a prior judgment

_ will lie if it was rendered in favor of a party who remained silent

notwithstanding a duty to speak and the other party was thus

left unaware of a valid Gefense. McMurry v. McMurry, 4 8. W.

357 (Tex. Sup. Ct. 1887) ; Schneider v. Sellers, 61 S. W. 541 (Tex.

Civ. App. 1900) ;.State v. Wright, 56 S. W..2d 950, 952; Eldridge

v. Eldridge, 259 S. W. 209, 214 (Tex. Civ. App. 1924) ; ; Reed v.

Bryant, 291 S. W. 605 (Tex, Ciy. App. 1927); Ralls v. Ralls, 256

S. W. 688, 695 (Tex. Civ. App. "1923). Here, of course, respon-

dent, as petitioners’ trustee and: agent, was under a duty to

speak.

° , 7

whether a release was “binding”; here the question was

whether a State Court judgment was “binding”. There, in

effect, the Court charged that the release was “not bind- —

ing”, except to the extent of the consideration paid there-

for; here the charge: was that the State Court judgment

was “binding” on Mrs. Grey, and was binding 6n Michael

and James, as well, if the attorney who purportedly ap-

peared for them had authority to do so. If, as this Court

held in Callen, the charge there had the effect of taking

the basic issue in the case from the jury, notwithstanding

the trial court’s efforts-at correction, a fortiori the charge

here had that effect, for the District Court made no effort

whatsoever.at any correction or clarification.

II.

While it may be, as respondent contends, Coke Br., p.

20, that under Texas law “silence, where. the party is

under 4. duty to speak, may amount to a concealment”,

the question here is whether the District Court’s instruc- —

tions to the jury were such that the jury must reason-

~~ably be taken to have understood the word “concealed”

as used by the District Court in its Special Issue No. 3,

Pet. 12a, I R. 289-304, to include mere silence on respon-

dent’s' part, regardless of good faith. Certainly, the jury

cannot reasonably be said to have gotten such an under-|

standing from the disconnected excerpts frontkbistrict

Court’s charge to which the Court below refers. Pet. 14a,

15a; 393 F. 2d at 381, 382. Thus, the District Court’s

statement to the jury that respondent contended that “it -

made full disclosure” to petitioners, did not instruct the

jury that an innocent failure of respondent to disclose a

materia! fact- was of equal significanee to a purposeful

concealment of such a fact in bad faith. |

Nor was the jury so instructed by the District Court’s

statement that “there must be fair dealing and good faith

by the Trustee toward the beneficiary. The Trustee * * *

has a duty to impart -to the beneficiary all material

facts * * *”.. For with the element of “good faith” so in-

_ jected, how could the jury haye understood that mere

failure to disclose, not in bad faith, ‘was encompassed by ~

the word “concealed” ?.

In any event, nothing in any of reapéedent’s opposi- -

tions to the petition, nor in’ the opinion of the Court below

_is adequate to overcome the failure of ‘the District Court

expressly to include- “failure to disclose” in the special

issues-submitted to jury. Respondent’s “failure to. dis-

close” was expressly an issue in the case, Pet. 24-26, and

petitioners expressly requested that such issue ‘be. sub- ~

mitted to the jury. Pet. 25. As respondent has so aptly

put it, ‘Arms. Br., p. 11, the District Court “should, es-

pecially where requested to do so, submit questions cover-

ing all issues raised fai the —:

III.

The record readily supplies the short answer to respon- .

dent’s contention, Coke Br., p. 22, that petitioners are in —

error in asserting, Pet. 15, that if was. admitted by re-

spondent “in its answer that it had not made disclo-

sure * * * of Majors’ indebtedness to it secured by: the

Republic Garage Building”. Thus, in their complaint, I

R. 64, 65, 67, -petitioners alleg ed:

Neither at the time said representations . were

made * *'*, nor at any other time material hereto, .

did defendant Bank disclose to any of the plaintiffs.

that

s .

oe

_ (j) On or about March 21, 1956, Z. L. Majors,

Trustee, executed and delivered to defendant Bank

a deed of trust upon the Republic Garage Build-

ing as security for the aforesaid alleged loan of .

-$650,000.00, as evidenced by a promisory note of

even date, and. since March 23, 1959, said deed of.

trust and note as renewed had been in.default.

Respondent’s answer to this allegation was, I R. 190:

. (j) Because of the death of Z. L. Majors, Trustee,

defendant cannot admit or deny, as a factual: matter,

that the note referred to was in default. Defendant —

admits the other allegations contained in subpara-

graph (j) but alleges that plaintiffs had notice of |

such deed of trust*and note by virtue of the. fact

that said deed of trust was duly recorded in the Deed

of Trust Records of Dallas County, Texas.

Clearly, petitioners’ reference was, correctly, to -respon-

dent’s admission in regard to the loan to Majors on the

- Republic Garage, and -not to “the acquisition by Z. L.

‘Majors, Trustee, of the A’Mell Building”, as | respondent

mistakenly contends. Coke Br., p. 22..

Petitioners not only called the District Court’s atten-

tion, Pet. 15, to the foregoing significant passages from

the pleadings, but to the pages of the transcript where

Stewart, respondent's president testified as — Il R.

499, 505:

Q. Mr. Stewart, did you ever tell Mr. Dorsey, Mrs.

Grey, or her son James, that the bank held a deéd of -

trust on the Republic Garage Building as a security

i =

_ for a debt in ‘ie amount of $650, 0008 A. I said I

don’t Tecall that I] did.

Q. You did not feel that you should inform Mrs.

Grey or Mr. Dorsey or her son that the bank at

. that time held a note and deed of trust on the Re-

public -Garage Building? A. You are asking me if

I thought I should tell her’ that?

' Q. Yes, sir. A. I certainly did not.

‘Petitioners also directed the District Court’s attention

to the page of the transcript where Presley, respondent’s

senior vice president, testified as. — Til R. 1016:

Q. All right, were you "asked as to whether or not —

the, Bank held a mortgage from the Majors 6n the

Republic Garage bine a A. We were not asked

that question.

Q. Did you give any information to that. effect?

A. I don’t recall that "Wwe gave any information to —

that effect.

“oo

The. record, I R. 363, is also clear that when the Dis- _

trict Court advised counsel of: the jury’s inquiry as to

whether any. testimony indicated disclosure by respon-

dent to petitioners of Majors’ indebtedness to respondent

secured by the Republic Garage Building, petitioners’ at-

torneys directed the Court’s attention to the foregoing

_ pleadings and testimony with particularity, and “requested —

‘that the Court instruct the jury that there was no such

testimony in the record and that it was undisputed that

. the Bank had not advised” petitioners theréof.

\

>

11

<

Respondent misplaces reliance, Coke Br., p. 21, on a

stipulation between the parties that on August 21, 1961,

respondent advised petitioners’ attorneys about the -Ma-

jors-Republic Garage loan. For the partition and sales”

agreement was executed on September 19, 1960, and the

State Court judgment was entered on November 28, 1960.

_ IR. 118,*136. .Moreover, it will be noted that. special is-

sues Nos. 2 and 3 submitted to the jury, and to which

alone its inquiry -was relevant, referred specifically to

times antedating “the. partition and sales agreement of

September 19, 1960, and the judgment of the State Court

of November 28, 1960”. I R. 297, 298.

Respondent’s effort, Coke Br., pp. 22, 23, to distinguish

Jackson, Pet: 27, is utterly unavailing. Respondent’s ad-

mission in its answer, and through the testimony of its

president and. senior vice — leaves no room for |

Cavil, tert : or ag inetiey a7

‘dannii: was no issue regardiad the utter

_ failure of respondent to make disclosure of Majors’ ‘.

d

debtedness secured by the Republic Garage Building,

contrary to respondent’s views, Arms. Br., p. 12, even

under Texas procedure in this regard, whisk allows the

_ trial court less leeway than federal procedure, it has long

been held, Int. and G. N. R. R. Co. ve ‘Stewart, 57° Tex.

~ 166, 170 (1882). that:

Where the evidence to a fact is positive and not dis-

puted or questioned, it is to be taken as an established

fact, and the -_ * of the Court, ; — — upon

that basis. |

_ Certainly, this rule must prevail where in the absence

of such a charge, the jury itself requests that it be in-

structed. In these circumstances petitioners were,, as the

‘Court said in Jackson, 257 F. 2d at’43, “entitled to have

the jury informed as a matter of niga".

Respondent's strong language, Arms. Br. p. 12, in re-—

gard to the fourth ground asserted in support of: the

petition, Pet. 10, 28, is wholly without warrant. Indeed,

the shoe is‘on the other foot. . Moreover, contrary to re:. -

spondent’s contention, petitioners did present to the Court

below the matter of the District Court’s apparent “bias —

_ and prejudice” in a section of their brief in: the Court

below (pages 5-7) headed “Trial Court Prejudged The

Case”, which is set out in toto in the Appendix hereto,

pp. la et.seg. While this was not expressly adverted to in

the Specification of Error, so-called, that omission is im-

material because such Specification, under Rule 75(d) of |

the Federal Rules ‘of Civil Procedure is no longer re-

_ quired,* and ‘under the Rules of the Court below, is but ~

_ part of an «sdaeamaaarle brief, and both saipeeces and the

* As stated in the Committee note to the 1966 r revision of subdiv.

. (b) of Rule 75: hes

“The appellant is required to serve a statement, of the. issues

which he iniends to present on appeal if only a part of the

proceedings is transcribed solely to allow the appellee to de-

termine whether the partial transcript will be adequate for the

determination of those issues. Such a statement is not the

- equivalent of an assignment of errors, which was specifically

declared tb be unnecessary by the terms of former Rule 75(d)

(the former provision dispensing with the’ assignment of errors

* is omitted from the rule only because the requirement’of an —

assignment is deemed sufficiently obsolete as not to require

pon ted abolition) and the statement should not ; result indimit-

ing the issues on appeal”.

Here all the proceedings in the District Court were transeribed

and transmitted to the Court below.

¢

A

Py aS 13°:

Court below had full and timely notice of petitioners’ con-

téntions in this fegard.

Neither Lawn, Husty; 1 nor Duignan, on. which Tespon-

dent relies, Coke Br., p. 24, supports respondents ‘conten-"

tion. In Lawn, the Court rejected as.a ground for a. new |

trial in a criminal case that certain exhibits had been un- |

lawfully seized in violation of the: defendant’s constitu-

tional rights where the defendant’s attornéy with full

knowledge had used such exhibits to corroborate an. aspéct

‘of the defendant’s. defense and had expressly stated that

he had “no objection” to their receipt’ in eviderice. In

‘Husty the Court’ refused to review rulings of the trial

Court excluding certaiti evidence, on the ground that .such

rulings “wer renot assigned as‘error on the appeal to the

-Court of Appeals, and tt does not appear that they were

presented 6r passed upon there”. 282 U.S. at 701, 702.

Similarly, in Duignan, the Court refused to consider a.

constitutional question because “The assignment of errors °

below did not refer specifically to it * * *, and so.far as

‘the record discloses it was not presented, there”. 274 U. S.

at 200 (emphasis supplied).. Here, the point: was made

in the Court below. Infra, pp. la.et seq.

_. The remarks of the District Judge te which petitioners

~ have averted, Pet. 10, were not, as respondent says, Coke

Br., p. 24 “carefully selected for quotation by the peti-

tioners,” but, rather, were carefully selected by someone

having authority to issue directions to the court reporter

to be “edited and omitted from the original transcrip-

tion * * *” TR. 27.

The hollowness of respondent’s contention that “taken

~in® context” the District Judge’s ‘remarks “show: a re-

14

spectful attempt. *_° * at a ‘simplification’ of the issues”,

Coke Br., p. 24, is laid bare when one reads them in con- —

text and recalls that somehow or other they had been

“edited and omitted” from the transcript, to be restored

to the record only after petitioners brought on a motion,

the prosecution of which included taking the testimony of

the court reporter. I R. 27, 32-33; IV R. 1809, I R. 33.

Petitioners and their counsel exhibited great restraint,

tolerance. and respect in not filing an affidavit of “per--

sonal bias or prejudice” against the District Judge. Cer-

‘tainly, their forbearance, should not result in their further

prejudice. ; 32° °

| v.

Respondent contends, Coke Br., p..25, that the issue con-

cerning Kelton’s authority to represent James and Michael

in the State Court case, Pet. 15-18, 29-32, presents “[nJo

important question of Fedéral law.” Respondent also con-

tends, Brin. Br., pp. 5-7, that, in any event, under applicable

law, Kelton’s lack bf authority to appear for James and

Michael could not be established in this action by evidence

dehors the record in the State Court case. Both of these

contentions are refuted by Cooper v. Newell, 173 U. S. 555

(1899), the holding and reasoning of which are no less

cogent today than when it was written.

Cooper came to this Court on certificate from-the 5th

Cireuit inquiring whether the judgment of a Texas state

court was subject to “collateral attack” in a federal court

by evidence showing that Newell, the defendant in the state .

action and plaintiff in the federal action attacking the

earlier judgment, was served with neither citation nor proc-

ess, and that the attorney who had~purported to appear in

the state action for him did so > without his authorization. .

Holding that federal courts have the power to entertain

and determine such actions, and that “the question of juris-

diction (of the court which rendered the earlier judgment

. wider attack] is open to inquiry even when the judgment

of a court of a state comes under consideration in a court

of the United States, sitting in the same state,” 173 U. S. at

- 567, this Qourt said, 173 U. S. at 568, 569:

It must be remembered that this action was com-

menced by Newell’as a citizen of New York against

citizens of Texas, in the exercise of a right secured to

him by the Constitution of the United States, and it

would go far to defeat that right if it should be held

that he was cut off *-* * from proving * * * that he

had not authorized any attorney to appear for him in

that action. [Emphasis supplied.]

Cooper recognizes, 173 U. S. at 566, 567, that federal

courts, regardless of their location, have the same author-

ity as state courts to inquire into the jurisdiction of a court

of another sovereignty to render a judgment in issue be-

fore them, and are not bound to-give judgments of the

courts of any state “full faith and-credit” except to the

extent required of the courts of another state, observing,

177 U. S. 566, that:

In Thompson v. Whitman, 18 Wall. 457, a on

ease in this court, it was ruled that “neither the con-

stitutional provision that full faith and credit shall

_be given in each state to the public acts, records,-and

judicial proceedings of every other state, nor the act

of congress passed in pursuance thereof, prevents an

inquiry into the jurisdiction of the court by which a

16 -

judgment offered in evidence was rendered”; that

“the record of a judgment rendered in another state —

may be contradicted as to the facts necessary to give

the court jurisdiction; and, if it be shown that such

facts did not exist, the record will be a mullity, not-.

withstanding it may recite that they did exist”? °° *,

[Emphasis supplied.]*

Nor is respondent on any surer ground in asserting, Coke

Br., p. 25, fn. 16, in effect, that Kelton’s disqualification to

represent James and Michael by reason of, conflict of in-

~_ ‘terests, - ‘Pet. 18, 32, was not urged below. This point was

“raised below, under broad specifications of error,® in appel-

lants’, i.e., petitioners’, brief, where petitioners urged (fn.

11, pp. 19, 20):

The fact that it appears from the judgment roll of —

the 1960 state court action, relied .wpon. by Bank as

validating its self-dealing, that the same attorney rep-

resented Bank, Trustee, and the beneficiaries renders.

absolutely void the 1960 state court judgment because

of the conflict of interest between his clients.

PA Likewise untenable is respondent’s assertion, Coke Br.,

p. 25, fn. 16, that Dorsey’s letter to Mrs. Grey of November

9, 1960, advising her that he had authorized Kelton to

represent the O’Connor Trust, Mrs. Grey and James and

Michael in the State court proceedings had the effect of

“making “Mrs. Grey (and in all probability James and

° See Sidran v. Tannenbaum, 3 391 S. W. 2d 93 (Tex. Civ. App.

1965), citing Cooper.

* Respondent professes to ignore that sciiieailiin of errors is no

longer required, supra p. 12 fn. 4. :

17

Michael)” aware of the conflict. Indeed, not only is the

record here clear that neither James nor Michael had any

knowledge of Kelton’s purported representation of them,

‘Pet. 16, but as a matter of law even their express consent

to Kelton’s employment would have been’ ineffective. Pet.

32, fn. 19." ;

The disqualification of Kelton to appear for petitioners

supplies a conclusive answer to respondent’s misplaced re-

liance, Brin Br., pp. 12-13, on the presumption of author-

‘ ity of an attorney entering an appearance for a party, for

it is obvious that such presumption does not apply with

respect to an attorney disqualified to act for that party.

7 Under Texas law, even the consent of the client does not remove

the disqualification of an attorney who represents conflicting in-

terests. J. W. Hill & Son, Inc. v. Wilson, 399 S. W. 2d 152 (Tex.

Civ. App. 1966); W. C. Turnbow Petroleum Corp. Vv. Fulton, 199

8S. W. bd 263, 264 (Tex. Civ. App. 1946). In Bryant v. ore, 21

S. W. 2d-604, 606-607 (Tex. Civ. App. 1930) it was held that the

only exception to this rule is when the adverse interests are not con-

ficting, such as when an attorney adjusts differences as an arbiter, -

stating: “That even in such cases all the facts, and the extent of

such adverse representation should be fully understood by both

parties” and that the attorney must “affirmatively disclose to [the

client] not only all material facts which would affect their relation-

ship but to disclose the legal consequences of these. facts as well”.

(Emphasis supplied.) Here, not only were the interest of the trus-

tee and of the beneficiaries clearly conflicting, but Dorsey’s letter

to Mrs. Grey of November 9, 1960, VIII R. 1135, and the very

partition and sale agreement, IR. 108, had misled her into believ-

ing that the interest of the Bank as Trustee of the O’Connor Trust

and her own were identical and that the State court proceeding

was a ministerial matter to be taken care of by respondent. How

could then it- be seriously argued that James and Michael, who

had not even been informed either by respondent or by Dorsey or

by anyone else of their rights and jpterests, or that they would

have to be represented in the State court proceeding, II R. 516,

521; III R. 1248, 1249, 1245, 1247, IV R. 1754, had “in all proba-

bility” consented to be represented by an attorney acting for con-

flicting interests, with full understanding of the conflict and knowl- -

edge of the consequences thereof.

18

‘Indeed,.even if there was no real conflict of interest, it

would have been incumbent upon such attorney to prove.

that his alleged client’s consent was given with full knowl-.

edge of the facts and understanding of their legal conse-

quences. Supra p. 17, fn. 7. -

It is also dispositive of respondent’s belabored efforts,

in complete disregard of Dorsey’s. own admission, Pet. 16,

to discover some inference of Dorsey’s employment .by

James and Michael in this matter from isolated sentences

of testimony quoted out of context. Obviously, even if

Dorsey had heen employed by James and Michael with re-

spect to the sale of the A’Mell Building and the State court

proceeding, he certainly had no authority to delegate it to

an attorney representing the conflicting interests of the

adversary. - .

Moreover, respondent’s truncated quotations, Coke Br.,

p. 14, fns. 5, 6, from Mrs. Grey’s and Michael’s testimony:

are misleading. Thus, the first passage quoted from Mrs.

Grey’s testimony, which related to the time of the State

. Court hearing, was immediately preceded by the following,

_ LIL R. 1388, 1389:

3. So, if you had been present [at the State Court

hearing] in person, you would have taken the same

position that all the attorneys took, wouldn’t yous. A.

At that time.

Q. At that time? A. I would have, yes.

Q. Then up until January, 1961, you, did not want

it ta come about where you’d have to return those :

properties, seven pieces of property that you got, and

‘ -the money, did you? A. That’s right.

Q. Nor did your sons, did they? A. They knew so

_very little of ut, I can’t speak for them. [Emphasis

supplied. J

nag

fs

19

Similarly, the second passage quoted from Mrs. Grey’s |

testimony, III R. 1296, was immediately — by. the

following:

Q. Did you advise James and: Michael what was

going on with respect to those properties at that time?

A. Well, I tried to but they weren’t, very interested

* * * about it. They didn’t feel it had anything-to do “""

with them:

Q. Well, they knew and appreciated that mae were

remaindermen in these properties? A. No they did

not. -

Q. They did not? A. They didnot.

Q. They didn’t know they had interest in this prop-

erty? A. They just didn’t understand it.

Q. Is it your testimony that they had no idea they

had an interest in this property? A. I tried to make

them understand. it but it was never something they

took seriously. [Emphasis supplied.]

‘Again, the passage quoted from Michael’s testimony, II

R. 576, continues as follows:

Q. What have you argued with her [Mrs. Grey]

about the Dallas property? A. I haven’t argued —y-

thing about it. ad

Q. Well, you have been in complete accord with her,

then, ts that it? A. Well, I have. never, discussed

Dallas matters with ler, sir. | .

Q. Then, you have never mentioned it one way or

the other from the beginning of time up until now, is

that what you mean? A. Well—yes, sir. .

Q. Sir? A. Yes, sir, that’s what I mean. [Em-

phasis supplied. ]

~

Respondent’s quotation, Coke Br., p. 15; Brin Br., p. 14,

of Michael’s testimony on deposition to the effect, II R.

572, that he “believed” that Dorsey “was ‘handling. the .

family interests”, his, and his brother’s and mother’s “at

the same time”, is also misleading, for, at the trial, on

cross-examination by an attorney representing the bank

in one of its several capacities, Michael testified with re-

“—~—-spect to such testimony, II R. 572, as follows: ¢

By Mr. Strasburgér:

Q. Didn’t you so testify? A. I did so testify.

Q. It is still the truth? A. As I explained it—at

that time I believe[d] some day I might inherit and.

that therefore whatever was done to grow from that

would be my interests.

And, just shortly before, IT R. 521, Michael had testified,

also on cross-examination,. that he did not know that he

and his brother had “valuable interests in Dallas”, .and,

further, that his mother had not explained to him and his

brother that “she only got the income from this property

in Dallas, and.on her death” it would be theirs. “She ex-

plained”, he testified, “that she had properties in Dallas”,

and that his “understanding from her explanation was, |

one day we didn’t have much * * *.” He concluded that

his “mother wanted” him and brother “to believe that we _

had to go and earn our own money, rather than wait for

an inheritance.” Pet. 17.

Thus, when considered in its context, the testimony on

which respondent relies makes it clear that Michael had

no understanding that he had any independent interest in

the trust property, and believed only that some day he

might possibly inherit it from his mother. In this éireum- —

21

stance, Michael’s passivity can not give rise to the infer-

ence to which respondent is necessarily-driven to support

its contention that Kelton was authorized-to appear for

Michael in the State Court case, i.e., that Michael had

authorized his mother to act for him with respect to his

independent remainder interest. Obviously, since he did .

not know of such interest, nothing he did or failed to do

can be taken as having reference to it.®

The record is clear that this is equally _—" to

James, as well. Thus,.on cross-examination by one of.re- ..

spondent’s attorneys ‘at the trial, IV R. 1753, 1754; with

- respect to his testimony on deposition, on which respondent

relies, Brin. Br., pp. 14, 15, to the effect that he “thought”

Dorsey “represented” him because he represented his

mother, as they “were all of the same family,” James testi-

fied :

Q. * * * You said that didn’t you? A. Yes.

Q. You still say the same thing, do you affirm that

today? A. No, because what I implied here is actu-

ally what I am saying today, in effect, that I am my

mother’ s son. Naturally J was interested in seeing

ee Rppuaieate lengthy deiettin Brin Br.,. pp. 16-18, from

Dorsey’s ‘testimony to the effect that Michael had intimated in

1956 with respect to a completely unconnected matter that he

would abide by his mother’s wishes and that Michael and James

had attended prior to March 1960 Dorsey’s conferences with Mrs.

Grey in regard to the proposed partition of properties held in com-

mon by Mrs. Grey with the O’Connor and Morgan Trusts, proves

nothing, since Michael did not become of age until March 7, 1960,

II R. 512, and since Dorsey’s statemerft that he made his March

21, 1960 proposal of partition on behalf of Mrs. Grey, James and

Michael is negated by that very proposal which was made Solely

on behalf of Mrs. Grey, VI- R. 539-540 and by Dorsey’s testimony

that ‘the “was acting solely for the interest of Mrs. Grey bearing ‘in

mind that [he has] had the advice of her two sons, as helpful as.

they could be in this partition”. III R. 1229.

22

_ that she got taken care of‘in the best possible way,

but I ‘can’t say he represented me, because I didn’t

know at that time that I had the rights that I. have.

Q. Well, please, let’s go back and read that sentence.

A. Well, I couldn’t rely on anybody when I didn’t know

why—know what my rights were. I didn’t even think

about it—nobody ever told me: about them, so how:

. could I leave it to anybody. -

Q. Do you still say that you ducuaiit because he

represented your mother, he represented you because »

you Were members of the family? * * * <A. I don’t

still say that—what I say—and what F meant there .

was that at that time I didn’t know. that I had any |

rights. It was entirely in my mother’s hands what she

did with her assets. Therefore, when she had an at-

torney, it was her business and I could only hope that

he would take care of her matters. [Emphasis sup-

plied. ]

If, as James and Michael testified, they were wholly

ignorant of their independent rights and interests in the

trust property, and thought only that they might (or might :

not) someday inherit it from their mother, -respondent’s

_ Tinker-to-Evers-to-Chance argument that Kelton was au-

thorized to appear for them in the State Court case must

fail, regardless of whatever else they knew or whatever

_ part they took, or did not take, in the events leading to

the partition and sale agreement. It is one thing for sons to

appear to evince some interest in, and to appear to ac-

quiesce in their mother’s: decisions regarding a transaction

involving: what they believe to be her property only, but

it’s quite another for the remaindermen. of interests in

property to authorize the life tenant to act for them. If,

as we assume, Kelton did not know what the fact was in ~

23

that regard when he purported to appear for James’ and

Michael, it must be recalled that he never spoke or corre-

sponded with either of them, Pet. 30, 19a.

Respondent betrays its complete lack of confidence in

its efforts to find some support for its position in the record

herein by arguing, Brin Br., pp. 7- 8, that James: and

Michael were not necessary parties to the State court ac-

tion or that their “interests were virtually represented by .

their mother, Mrs. Grey”. Indeed, par. 4.01 of the Parti-

tion and Sale Agreement expressly provided that it ‘was

“subject to the condition that a judgment be entered .

in a proceeding in which . . . the remaindermen, individn-

ally and as representatives of the class consisting of the

issue of Mrs. Grey are parties ..:”, I R. 114, and par.

4.05 thereof that if any condition, nihaitines the one quoted

above, was not complied with by December 31, 1960, the

' agreement would become null and void, I R. 116.

. Moreover, respondent quotes out of context par. C of.

-article 7425 (b)—24 Tex. Civ. St. by carefiilly omitting the ~

sentence immediately preceding: “If the action is ’ predi-

® cated upon any act or obligation of any beneficiary, such

beneficiary shall be a necessary party to the proceedings. 44

Pet. 32a-33a, which clearly limits the meaning of the sen-.

tence quoted by respondent, the first words" of which are:

“the only necessary parties to such actions ...”, to Simm-

actions “predicated. upon any act or obligation of any

beneficiary.” It is obvious, therefore, that the sentence

quoted by.respondent, Brin Br., p. 7, is completely unre-

lated to a proceeding under par. E of 7425(b)—24, Tex.

Civ. St., Pet. 33a, to relieve a trustee from prohibition of

self-dealing. The term “beneficiary” as used in par. E of

said section is clearly taken in its general meaning defined

by Article 1425(b)—4 (J) as: “Any-person entitled to re-

2

ceive from a- trust any benefit of whatever kind or nature”,

which includes se remaindermen.”.

VI.

Unable ‘to challenge Petitioners”. demonstration that the

:- . special verdict of the jury on the issue of damages and of.

market value of the A’Mell Building was predetermined

by the District Court’s instruction as to the binding effect

‘of the State court judgment, Pet. 20, respondent argues

that. such verdict is supported by the appraisals made by

Mr. Dunham and by the Dallas Real Estate Board. Brin

-Br., p. 20. Respondent however carefully fails to mention

that Mr. Dunham’s appraisal was made in June 1955, VI >

R. 293, 304, more than five years prior to the sale involved

here and that the Dallas Real Estate Board’s appraisal

made on October 9, 1959, VI R. 545 at $500,000, i.e. $28.57

“per square foot, had no relationship whatsoever to the value

of the properties in Block 60 in September 1960, for the

' respondent’s own estimate of some of the properties therein

in February 1960 was at an average of $100 per square

foot, V R..135 and respondent’s own schedule of prices paid

_ for the other properties in the same block showed a high

- of $93.33 per square foot and a low of $48 per square foot.

Significantly, respondent’s President Mr. Stewart admitted

at the trial that some of ‘the properties in the block ,had

been acquired at “bargain” prices, II R. 611. -

-®©Under Texas laws, a trustee owes the same fiduciary duty to

life tenants and to vested .and contingent ‘remaindermen, Brown ;

. W. 2d 172, 181 (Tex. Civ. App.).

is respondent’s argument, Brin Br., p. 8,

of James arid Michael | by Mrs. Grey,

’ for it is ciaauiae that the ac ig

is never binding upon another |

ad

25

Thus, respondent’s references to obsolete appraisals

serve only to confirm that, but for the disputed instruction

of the District Court, the jury could not have found any

basis in the record for its special verdict. eee

%

Respondent displays a. similar disregard of ‘the andet |

fundamental ‘principles of the law. of trusts in stating that

the payment of brokerage commissions to Majors on the\

-sale of Republic Garage Building, allegedly Majors’ own

property, did not-have to be revealed to petitioners because j

“there was no representation that there had been no com. |

mission” Brin’s Br. > PP. 20-21.

Majors himself testified that he had never heard of a.

‘seller receiving a brokerage commission in n selling“his own |

. property, IV R. 1680. | : 7 L

Respondent also disregards the record in arguing, Brin

Br., p. 21, that “the only claiméd relevance” of the payment

of eommission and the forgiveness of additional interest

on Majors’ defaulted note after. maturity “was that Mrs.

Grey wanted to get more for the A’Mell Building than the

Bank paid for the Republic Garage Building.” Respondent

conveniently overlooks its admission that it had knowledge

that the sales price for the A’Mell Building was computed

for the 10,000 interior square feet thereof at the price of

$59.64 per square foot represented by respondent to be

paid to Majors for Republic Garage Building, with a bonus

of 25% for the corner portion of -_ A’Mell ne lt

' RB: 1465-6; 1019-20.

No one could came contend that comparison of prices

for properties in the same block may be made regardless

of their respective size. A’Mell Building contained 17,500

square feet, while’ Republic Garage Building: contained only .

10,900 square _ IR. 188.

ad

Respondent fails to mention that it had expressly ac-

knowledged that in determining the price for the A’Mell

Building, Mrs. Grey had relied on the truthfulness, and

correctness of respondent’s schedule of prices submitted

by it to Mrs. Grey, i 4. 139-140. Obviously, the payment

ission on the sale of his own property

and other advan granted to Majors were certainly

relevant to the question of truthfulness and correctness of

respondent's schedule of prices. §

CONCLUSION

Respondent's sixty-six pages of opposition in its several

capacities, like the manner in which it laid the State Court

action,” would obscure the issues, and what they involve.

*” In the State Court action, respondent named itself, in its pfi-

HE

fi

i

;

= E

e

7F

rE

43

if

:

;

¢

F

vidual capacit

concealed material facts”, etc. [Emphasis supplied.) However,

the beneficiary of the O’Connor trust, Mrs. Grey dealt with

respondent in its fiduciary capacity as trustee of the O’Connor

trust, and not with respondent in its “individual capacity”, as

suppress them, the peculiar nature of her charge, in conflict’ }

with both Callen and the standard set up by Rule 49(a), 4

the adequacy of Kelton’s appearance in the State Court

action to satisfy the requirements of due process, and the

affirmance by the Court below, point to the conclusion that

the petition should be granted.

Respectfully submitted,

Geratp Meyer

Counsel for Petitioners

477 Madison Avenue

New York, N. Y. 10022