Court of Chancery Rejects Claims to Recover Gifts Given by Now-Deceased Elderly Widower to Much Younger Girlfriend, with the Exception of One Gift that Resulted from Fraud

Delaware Fiduciary Litigation Blog

Posted April 20, 2015

Estate of George M. Reed, Jr., et al. v. Lisa Grandelli C.A. No. 8283-VCG (April 17, 2015)

Since the time of King David and Abishag—and, surely, before—certain old men have pursued an interest in certain young women.” This quote from Vice Chancellor Glasscock nicely sums up the factual background of this case decided in the Delaware Court of Chancery on April 17, 2015. Here, a “moderately well-to-do recent widower” in his mid-eighties fell for a waitress from a small Southern Delaware town, whose age was that of his granddaughter. During their fourteen month relationship, the decedent lavished the waitress (the “Respondent”) with hundreds of thousands of dollars’ worth of gifts. After the gift-giving widower’s death, his heirs, trust and estate sought to recoup those gifts. What made this case rather unusual was that the Petitioners did not contend that the decedent lacked capacity, that he was vulnerable to the exercise of undue influence, or that the gifts were the product of common law fraud. Rather, the Petitioners argued that the Respondent committed equitable fraud or breach of trust consistent with the Court of Chancery’s ruling in Swain v. Moore, 71 A.2d 264 (Del. Ch. 1950). The Petitioners maintained that Swain dictates that when an elderly person befriends a younger individual, and acts on that affection by making gifts to her, fraud on her part is presumed, and the burden is on the recipient of the gifts to demonstrate entire fairness in the relationship.

The Court first analyzed the decedent’s cash transfers to Respondent. The Court held that these cash transfers were clearly gifts.  Delaware law holds that a gift is made by complete and unconditional delivery of property, which requires donative intent, and acceptance of the property by the donee. The donee has the burden of establishing, by clear and convincing evidence, all facts essential to the validity of a purported gift. This burden arises, the Court said, “out of the rebuttable presumption, often seen in the context of resulting trusts, that a purchaser of property intends that purchased property to inure to her own benefit.” The Petitioners on the other hand, argued that the law of gifts should not be applied because the facts in the case were analogous to those in Swain. The Court then distinguished this case from Swain.

The Court held that the decedent in this case—unlike the elderly man in Swain—was not dependent on the Respondent. The Court explained that like the Respondent, the decedent was also receiving what he wanted from their relationship (specifically, physical and emotional attention he found flattering and fulfilling, from a much younger partner). In contrast, Swain involved an elderly, lonely widower, estranged from his own family, who was befriend by a young couple living nearby. He eventually began making gifts of money to them, and even paid for construction of part of their new house with the understanding that he could live out the rest of his life with them. The elderly man moved in and, as a result, became dependent upon them, and made gifts to them by which he impoverished himself. That was not the case here.

The Court stated that Swain was a trust case. It was a trust case because the elderly man became dependent on the younger couple, and a confidential relationship arose in which the younger couple owed fiduciary duties to him. Here, the decedent did not rely upon the Respondent and he remained close to his own family. The decedent was not taken advantage of and knew exactly what he was doing when he gave his young girlfriend gifts. As the Court put it, “[i]t would be simple paternalism, however, to suggest that solely because of advanced age, an individual may not indulge in pleasures at his own expense that he finds appropriate, even if that expense appears to others to be foolish or excessive.”

The Court further held that any transfers that were noted in writing to be loans should be paid back to the estate. And the Court did find that one transaction did amount to fraud. Regarding that transaction, the Respondent told the decedent that she wanted to go on vacation with her family to Key West. But the Respondent actually went to Key West with her other boyfriend. She claimed that she disclosed this to the decedent and that he was okay with it. The Court found that to be a lie, and consequently ordered her to refund the cost of that trip back to the estate.

Author(s)

Phillip Giordano
Associate
Gordon, Fournaris & Mammarella, P.A.
William M. Kelleher, Director
Director
Gordon, Fournaris & Mammarella, P.A.