Krug v. Ambrose

845 F. Supp. 516, 1992 U.S. Dist. LEXIS 22052, 1992 WL 564847
CourtDistrict Court, E.D. Tennessee
DecidedMay 5, 1992
DocketNo. CIV 3-91-0350
StatusPublished

This text of 845 F. Supp. 516 (Krug v. Ambrose) is published on Counsel Stack Legal Research, covering District Court, E.D. Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Krug v. Ambrose, 845 F. Supp. 516, 1992 U.S. Dist. LEXIS 22052, 1992 WL 564847 (E.D. Tenn. 1992).

Opinion

MEMORANDUM OPINION

JORDAN, District Judge.

This civil action came on for a hearing on Friday, May 1,1992 on the defendant Paul T. Coleman’s motion to dismiss or, in the alternative, for summary judgment [doc. 23], and his motion for sanctions under Fed.R.Civ.P. 11 [doc. 22]. The court has considered the material filed in support of and in opposition to these motions, and heard the arguments of counsel. The court makes the following findings and conclusions.

The plaintiff filed his initial complaint [doc. 1] on June 10, 1991. Jurisdiction is asserted on the basis of diversity of citizenship. The plaintiff says that he formed the Krug Investments partnership with his father, the late George C. Krug, in 1984; that his father died in July, 1988, which made the plaintiff a successor trustee of the George C. Krug Trust, his mother being the other trustee; and that in 1988, he, individually, as a partner in Krug Investments, and as a trustee of the George C. Krug Trust, retained the defendants Ambrose, Wilson and Mr. Wilson individually as attorneys to render advice concerning certain partnership and trust matters.

The plaintiff alleges that the defendants Ambrose, Wilson and Mr. Wilson individually (Mr. Wilson is a partner in this law firm) committed professional malpractice in several ways. First, he says that they failed to advise him of a requirement that he register, in his capacity as a co-trustee of the George C. Krug Trust, with the Tennessee Secretary of State as a nonresident fiduciary. Second, he says that these defendants were negligent in their advice concerning the George C. Krug Trust agreement, because it turned out that an arbitration clause in the trust agreement was not sufficient to prevent costly litigation seeking the dissolution of the partnership. The plaintiff says that he expressed to these defendants at the outset of the representation his and his late father’s desires to avoid this result.

Third, the plaintiff says that Ambrose, Wilson and Mr. Wilson engaged in a conflict of interest by representing Eleanor B. Krug in litigation in the Knox County, Tennessee Chancery Court in which the plaintiff and Krug Investments were named as defendants, and in which the dissolution of this partnership was sought.

In their answer [doc. 9], Ambrose, Wilson and Mr. Wilson say that the plaintiff was a partner in Krug Investments and a remainder beneficiary of the George C. Krug Trust; that upon the death of George C. Krug, the plaintiff and his mother, Eleanor B. Krug, became co-trustees of this trust, but that the mother had the discretion under the trust instrument to remove the plaintiff as a trustee; that the plaintiff never retained these attorneys as counsel for him individually, and that the plaintiff was never these defendants’ client; and that the plaintiff did not seek advice from these defendants concerning his obligations as a nonresident fiduciary. Ambrose, Wilson and Mr. Wilson deny all allegations of professional malpractice made against them. These defendants admit that they were counsel for the plaintiffs in Eleanor B. Krug, Individually and as Trustee of the Eleanor Barron Krug Revocable Trust and Eleanor B. Krug and Valley Fidelity Bank and Trust Company, Co-Trustees of the George Krug Trust v. Gregory C. Krug, Krug Investments, and Morgan, Keegan & Co., Inc., in the Knox County, Tennessee Chancery Court.

On November 15, 1991, with the court’s permission, the plaintiff filed his amended [518]*518complaint, by which he added Paul T. Coleman and Valley Fidelity Bank & Trust Company as defendants in this civil action. In his amended complaint, the plaintiff states a third cause of action, in addition to those for professional malpractice and conflict of interest stated against the two original defendants, against all defendants, including Mr. Coleman as a former partner in Ambrose, Wilson, and Valley Fidelity as receiver of Krug Investments and co-trustee of the various trusts established by George C. Krug. However, the plaintiff seeks only declaratory relief against and discovery from Valley Fidelity, and so has waived for the time being any requirement that Valley Fidelity respond to his complaint.

The plaintiffs third cause of action is for the recovery of all attorney fees paid by the George C. Krug Trust to Ambrose, Wilson, Mr. Wilson, or Mr. Coleman, or to any firm in which either Mr. Wilson or Mr. Coleman have or had any interest. The plaintiff also seeks to have the trustees of the George C. Krug Trust directed not to pay any more fees to these persons or law firms in privity with them. The plaintiff relies upon an in terrorem provision in his late father’s will:

SEVENTH: I hereby revoke any devise, legacy or benefit given by this Will or in the Trust referred to in Article THIRD above to each heir of mine or other persons, who directly or indirectly either singularly or in conjunction with any other person or persons contest or seek to secure the revocation of probate of this Will, or who attacks or seeks to impair or invalidate any of the provisions of this will or such Trust, and as to such devise, legacy and benefits so revoked this Will and such Trust shall be executed and carried into effect as if such heir and/or person had predeceased me and left no issue of his or her own surviving him or her.

(Emphasis in the quotation in the amended complaint.)

To support this cause of action, the plaintiff alleges in his amended complaint that Eleanor B. Krug wished to finance her purchase of a residence in Knoxville with trust funds; that Mr. Wilson as Ms. Krug’s attorney threatened to remove the plaintiff as a co-trustee if he did not agree to this transaction; that the plaintiff then acquiesced, “[sjolely to avoid inter-family (sic) litigation;” that when the plaintiff refused to agree to allow the Eleanor Baron Krug Q-Tip Trust to purchase this residence, Eleanor B. Krug, on Mr. Wilson’s advice, withdrew $250,000.00 of Krug Investments’ money from an account with Morgan, Keegan & Co.; that after the plaintiff instructed Morgan, Keegan & Co. to seize back these funds, Eleanor B. Krug, on Mr. Wilson’s advice, removed the plaintiff as a co-trustee of the George C. Krug Trust and replaced him with Valley Fidelity; and that the plaintiff and his mother then reached a settlement under which the Knoxville residence would be acquired by the Eleanor B. Krug Revocable Trust, in large part with money borrowed from the Eleanor Baron Krug Q-Tip Trust, the plaintiff would be restored to the status of co-trustee, and the plaintiff would acquire his mother’s residence in Louisville at “fair appraisal.”

The plaintiff goes on to say that his mother did not enter into this settlement agreement in good faith, but instead planned to remove him again as a co-trustee upon the acquisition of the Knoxville residence; that the parties believed the Louisville residence was worth $465,000.00, but that appraisals showed it to be worth only $275,000.00; that the plaintiff offered to purchase it for the appraised value, and Mr. Wilson counteroffered on behalf of Eleanor B. Krug to sell it for $375,000.00, and suggested that if the plaintiff increased his offer, it might prevent his removal from the position of co-trustee of the George C. Krug Trust; that Eleanor B. Krug did so remove the plaintiff; and that when the plaintiff questioned the validity of this removal, the lawsuit against him filed by Eleanor B.

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Related

Vaccaro v. Cicalla
89 Tenn. 63 (Tennessee Supreme Court, 1890)
Tate v. Camp
147 Tenn. 137 (Tennessee Supreme Court, 1922)
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829 F.2d 1370 (Sixth Circuit, 1987)

Cite This Page — Counsel Stack

Bluebook (online)
845 F. Supp. 516, 1992 U.S. Dist. LEXIS 22052, 1992 WL 564847, Counsel Stack Legal Research, https://law.counselstack.com/opinion/krug-v-ambrose-tned-1992.