Unreported / Non-Citable
Background
In 2004, Terry Joe Cook and John H. Moon entered into an agreement giving the survivor an exclusive right to purchase the other’s interest in commonly owned properties, including mineral interests and company ownership stakes. The agreement provided that upon the first party’s death, the survivor had 90 days to notify the estate representative of intent to purchase, with closing required within 60 days of delivering an appraisal to the estate.
John H. Moon died on February 25, 2025, and Lesley Moon Phillips was appointed personal representative of his estate. Cook provided notice of his intent to purchase on April 15, 2025, and again on August 20, 2025, submitting appraisals for mineral interests in Gregg County, Texas. Phillips failed to close the transaction within the contractually required 60-day period following each notice.
Cook sued Phillips in Texas state court on October 28, 2025, seeking breach of contract and accounting for royalties generated from the disputed mineral interests. Phillips removed the case to federal court based on diversity jurisdiction. Cook then moved to remand, arguing the “probate exception” to federal jurisdiction barred the federal court from hearing the case because the disputed property was in the custody of the probate court.
The Court’s Holding
The court denied Cook’s motion to remand. The probate exception—which reserves to state courts jurisdiction over the probate or annulment of wills and the administration of decedent’s estates—does not apply. The exception bars federal courts only from (1) probating or annulling a will, or (2) reaching a res (property) in the custody of a state court by exercising in rem jurisdiction over it.
The court applied the Fifth Circuit’s two-prong test: whether the disputed property is estate property in probate court custody (yes, both parties conceded), and whether adjudicating the plaintiff’s claims would require the federal court to assume in rem jurisdiction over that property (no). Cook’s claim is one for breach of contract—an in personam action against Phillips personally—not an action to recover or control the property itself. Even though Cook sought specific performance as a remedy, this did not convert the action to in rem; a suit for specific performance remains in personam because it enforces contractual obligations against the defendant, not against the property.
The court distinguished an earlier case (Janvey v. Hamric) where a turnover order would have required the executor to distribute estate property, thereby requiring the federal court to exercise in rem jurisdiction. Here, a judgment for Cook would simply create a claim against the estate that must be filed with the probate court under Texas law; it would not require the federal court to order distribution or interfere with probate proceedings.
Key Takeaways
- The probate exception does not bar federal jurisdiction over breach of contract claims involving estate property, even when specific performance is sought as a remedy.
- The critical distinction is whether the action is in personam (against the defendant’s personal obligations) or in rem (seeking to control property itself).
- A successful judgment for breach of contract involving estate property must still be filed as a claim with the probate court under state law, which preserves the probate court’s ultimate authority over estate administration.
- Federal courts retain diversity jurisdiction to adjudicate contractual rights between parties, including creditors, legatees, and heirs seeking to enforce claims against decedent’s estates.
Why It Matters
This decision provides important clarity for parties with contractual claims against decedent’s estates. It establishes that the probate exception does not broadly shield estate property from federal court jurisdiction; rather, it applies only when federal adjudication would require the court to exercise direct in rem control over estate assets. Parties seeking to enforce breach of contract claims—including buy-sell agreements, business contracts, and mineral interests—can proceed in federal court even when the defendant is an estate representative and the disputed property is in probate court custody.
The ruling reflects a practical accommodation between federal and state court authority: federal courts can adjudicate contractual rights and award specific performance, but the ultimate distribution of estate property remains under probate court supervision through the requirement that any judgment be filed as a claim against the estate. This approach respects federalism principles while ensuring that federal diversity jurisdiction functions as intended for ordinary contract disputes.