April 2015
Kathryn Mennen et al v. Wilmington Trust Company et al C.A. No. 8432 (Motion for Summary Judgment)(April 24, 2015)
On January 17, 2014, the Master in Chancery issued a draft report denying the beneficiaries’ motion for summary judgment and concluding that the court could not pierce the spendthrift clause of the co-defendant trustee’s separate trust due to the trustee’s repeated wrongdoings. Our summary of this case can be found here. In the interest of efficiency, and in recognition that the parties would be engaged in trial soon after the issuing of the draft report, the Master stayed the time period to take exceptions to the draft report until she issued a draft post-trial report resolving the beneficiaries claims against the co-trustees.
On April 24, 2015, the Master in Chancery issued her Final Report, adopting her ruling in her Draft Report. But for a few non-substantive changes, the Final Report is nearly identical to the Draft Report.
Kathryn Mennen et al v. Wilmington Trust Company et al C.A. No. 8432-ML (Post-trial)(April 24, 2015)
On December 8, 2014, the Master in Chancery issued a draft report finding that the individual co-trustee, Jeff Mennen, was in breach of his fiduciary duties because he acted in bad faith and willful misconduct when making disastrous investment decisions over the past twenty years. The corporate trustee, Wilmington Trust Company, had argued that the trust was a directed trust, and thus was required to make Jeff’s investments. The Master did not make a ruling on Wilmington Trust’s conduct because Wilmington Trust settled on the eve of trial. We wrote about the Draft Ruling in December, and that summary can be found here.
On April 24, 2015, the Master issued her Final Report, adopting her ruling in the Draft Report. Her Final Report is nearly identical to the Draft Report, with the exception of the final amount due to the beneficiaries. The parties took exceptions on how to calculate certain set-offs. Specifically, the parties disagreed as to whether the set-offs should be taken before or after pre-judgment interest is calculated. The Master adopted the Restatements' approach which states that set-offs should be taken after pre-judgment interest is calculated. As a result, the Court found that in total, Jeff owed the beneficiaries $96,978,299.93, plus pre-judgment interest at 7.75% compounded quarterly, accruing from the date of each wrongful investment until the date of judgment. In her, Draft Report, that amount was $72,448,299.93.
Weber, Paul E. v. Charles J. Weber Jr. C.A. No. 8213-MA (April 20, 2015)
This case involved a decedent whose 2004 will left her entire estate to her son Charles and nothing to her other son Paul. Paul sued and alleged that their mother wanted to renounce the 2004 will and create a new will leaving Paul the family home and fifty percent of her remaining estate; however, Paul claims that Charles prevented her from doing so. Paul also contends that after their mother’s death Paul confronted Charles about his actions, and Charles purportedly agreed to honor their mother’s wishes and share her estate with Paul in exchange for Paul’s agreement not to contest the 2004 Will.
Charles sought summary judgment. In seeking summary judgment, Charles raised several arguments, including that this action constitutes a petition for review of the 2004 Will, which is time-barred by 12 Del. C. § 1309. More specifically, Charles contended that he is entitled to summary judgment as a matter of law because this action is, in reality, a petition for review of a will that is time-barred under 12 Del. C. § 1309 as it should have been filed no later than six months after the 2004 Will was admitted to probate on January 11, 2010.
But, Master Ayvazian concluded that even though this action is premised on Paul’s apparent belief that the 2004 Will was invalid and did not reflect the testamentary wishes of the decedent, this action is not a will contest. She explained that it was instead a suit for specific performance of an oral contract. Therefore, she found that the six-month limitation period of Section 1309 did not apply here.
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.
