Magistrate In Chancery Dismisses Claim Because, In Addition To Chancery Lacking Subject Matter Jurisdiction, The Co-Trustee Had No Standing To Bring The Action Pursuant To 10 Del. C. § 3701

Gwen Thornton v. Louise Lamborn and Cheryl T. Bell, C.A. No. 2022-0842-SEM (January 29, 2024)   

        Here, the Magistrate in Chancery was faced with a case in which the Plaintiff challenged the conduct of Louise Lamborn and Cheryl Bell (now Cheryl Patterson, “Patterson,” together with Lamborn, the “Defendants”) in managing the assets of the Decedent before his death. According to the Magistrate’s summary of the allegations, “[d]uring the final decade of his life, the Decedent relied on Lamborn, his friend and power of attorney.  Lamborn 'worked in concert' with Patterson, the Decedent’s stepdaughter. Their conduct is now challenged by the Plaintiff, the Decedent’s daughter, in her capacity as co-trustee of the Decedent’s trust” (the “Trust”). Patterson also served as co-trustee of the Trust per her 1998 appointment to that role.

        The Decedent settled a dispute with his stepchildren through an agreement executed January 27, 2004 (the “Settlement”). The Magistrate’s  letter opinion, explained that, “in pertinent part, the Decedent agreed, through the Settlement, to ‘keep in force the [listed] insurance policies’—including the Protective Policy—‘and to pay or cause to be paid the premiums therefor to the extent necessary to prevent such policies from lapsing and to maintain them[.]’”

        Decedent’s health grew worse over time, but he ultimately survived his wife by over twenty years. As his health worsened, including suffering several strokes and being diagnosed with dementia, the Decedent became “reliant” on the Defendants. Plaintiff alleged, in the present matter, that the Defendants interfered with the Settlement. Decedent died in 2020, and at that time, some life insurance policies were liquidated and paid into the Trust, but the Protective Policy was not among them.

        It was only after her appointment as co-trustee of the Trust (at Decedent’s death) and through separate litigation that the Plaintiff allegedly learned that the Protective Policy lapsed in 2018. The Plaintiff purported to have uncovered that prior automatic payments toward the premiums for the Protective Policy were stopped around 2016 and, despite notices and warnings, premiums went unpaid until the Protective Policy was cancelled in 2018. Absent that cancellation, the Protective Policy would have allegedly paid $225,000.00 to the Trust.

        Defendants argued that the Court of Chancery lacked subject matter jurisdiction because there was no equitable right asserted nor any equitable remedy sought. In addressing the Defendants’ respective pleading-stage dispositive motions, the Magistrate explained that,

the Plaintiff purports to plead a claim for breach of fiduciary duty. But that claim is not viable, nor does it reflect the essence of the Plaintiff’s otherwise legal claim for money damages.  Under 10 Del. C. § 3701, “[a]ll causes of action, except actions for defamation, malicious prosecution, or upon penal statutes, shall survive to and against the executors or administrators of the person to, or against whom, the cause of action accrued.”  Thus, “[c]laims the principal may have for breach of fiduciary duty survive to the fiduciary of the principal’s estate, not the beneficiaries of the principal’s estate[,]” or, as attempted here, the co-trustee of the principal’s trust. (emphasis added).

       The Magistrate then noted that, regardless of that just-discussed statutory bar, the Plaintiff’s claim is contractual and, at its core, a claim for monetary damages. While such a finding could, in some circumstances, lead the court to allow transfer to Superior Court such that the Plaintiff can litigate the legal claim there, that is not what happened here.  In this case, the Magistrate concluded,

The Complaint should be dismissed.  Under 10 Del. C. § 1902, “[n]o civil action, suit or other proceeding brought in any court of this State shall be dismissed solely on the ground that such court is without jurisdiction of the subject matter, either in the original proceeding or on appeal.”  But, here, not only do I find jurisdiction lacking, but I do so because the claim, as pled, is not viable.  Thus, dismissal is not “solely” for lack of jurisdiction and I recommend this action be dismissed without leave to transfer.  (emphasis added).