September 2017
IMO Last Will and Testament of Rachel D. Harley, deceased; Shirley Harley Brown v. Mary M. Harley, et. al. C.A. #110437-MZ (September 18, 2017)
Three sisters have been embroiled in litigation over control of family property since 1999. After their mother passed away, the sisters’ distrust resulted in a probate dispute. This opinion, however, focused on the discrete issue of service. The Master found that the pro se Petitioner failed to serve the defendants (who are the Petitioner’s two sisters). The Master recommended that the court dismiss this action against one sister and give the petitioner one final opportunity to serve the other sister.
The two defendants are Delaware residents, but the Petitioner maintained only that she delivered the petition to them by first class mail. For an individual Delaware resident with a known address, who has not demonstrated any attempt to avoid service, Court of Chancery Rule 4(d)(1) requires service of a summons and complaint by personal delivery or by leaving copies thereof with an appropriate person at the individual’s residence.
Further, when Petitioner filed her motion for summary judgment, she submitted a certificate of service listing only service on two Delaware attorneys, but neither of those two attorneys has appeared in this matter and both made clear that they do not represent the defendants in this case. As such, the two sisters were operating pro se in this matter.
Sandra, one of the sisters/defendants, replied to the court and stated that she was not properly served. The Master interpreted Sandra’s pro se assertion that she was not properly served as a motion to dismiss for insufficiency of service of process pursuant to Court of Chancery Rule 12(b)(5). The Master noted that “[i]t is fundamental that the Court only may exercise personal jurisdiction over a defendant when service is properly effected, regardless of whether or not actual notice is achieved”, that “[p]ersonal jurisdiction must be effected through proper service of process, and actual notice by a defendant does not satisfy this constitutional requirement” and that “the plaintiff bears the burden of demonstrating that service of process was effective.” (citations omitted). The Master recommended that Sandra’s motion to dismiss pursuant to Court of Chancery Rule 12 (b)(5) be granted.
The other sister/defendant, Mary, did not appear. Yet, the Master still analyzed her situation. The Master concluded that in this case “the deficient service is attributable entirely to the [Petitioner’s] dilatory conduct.” The Master found that there was no evidence that Mary, in any way, evaded service. Given all that, the Master gave the Petitioner one final thirty-day extension within which to properly serve Mary and file proof of service pursuant to Court of Chancery Rule 4. The Master wrote that she will dismiss the case if that is not properly done in that time frame.
One final note. It is worth mentioning that the Master took “judicial notice of the fact, provided by the public tracking website of the United States Postal Service, that the July 18, 2017, certified mailings to Mary were not delivered by the date of this report. Del. R. Evid. 201(b)(2); see Henderson v. Blalock, 2017 WL 3304451, at *2 n.5 (Tex. Ct. App. Aug 3, 2017) (taking similar judicial notice and collecting cases).”
IMO Ronald J. Mount 2012 Irrevocable Dynasty Trust U/A/D December 5, 2012, C.A. No. 12892-VCS
The parties in this case reached a binding Settlement Agreement, effective July 5, 2016. The Settlement Agreement details, inter alia, the consideration each party will receive, the representations and warranties each party would give and the means by which the decedent Ronald Mount’s estate and trusts would be administered. A Florida Probate Court approved the Settlement Agreement on July 13, 2016. The Delaware Court of Chancery approved the Settlement Agreement and modifications to the trust instrument for the Ronald J. Mount 2012 Irrevocable Dynasty Trust (the “Dynasty Trust”) on August 11, 2016.
After the settlement closed, the parties quickly disagreed over the steps necessary to consummate the Settlement Agreement, particularly how to divide the Dynasty Trust. Following a breakdown in the parties’ discussions the Trust Protector filed a petition in the Court of Chancery on November 10, 2016, seeking instructions on how to divide the Dynasty Trust under the Settlement Agreement. The Trust Protector claims that, as part of the Settlement Agreement, Ian Mount (“Ian”)—a beneficiary and party to the Settlement Agreement—committed to pay off a $4.2 million note owed to the Dynasty Trust but has now refused to do so. According to the Trust Protector, the plain language of the Settlement Agreement requires that Ian make this payment as a first step before the Trust Protector can make payments out of the Dynasty Trust as required by the Settlement Agreement. Ian instead maintains that this transfer can be accomplished by a simple offsetting accounting entry and a payment to a separate revocable trust.
The key language in the Settlement Agreement reads:
Ian, as Personal Representative of the Estate and/or the successor trustee of the Revocable Trust, shall repay the $4.2 million note from the Revocable Trust to the Dynasty Trust. It is not anticipated by the Parties that the $4.2 million note, originally reflecting the debt owed by Ronald J. Mount to the Dynast Trust, be forgiven or cancelled without repayment thereof.
The Court found that “[t]his is the first of several steps listed in the section governing administration of the Dynasty Trust. The placement of the provision relating to Ian’s payment obligation into the Dynasty Trust is important because it reveals the parties’ intent that this payment is to be the first in a sequence of events listed in Paragraph 8. Each of the subsequent events involve payments out of the Dynasty Trust or a division of the Dynasty Trust once the trust is fully funded. Despite the clear mandatory language in Paragraph 8(a), and its clear direction as to timing, Ian argues that this step is optional because the parties should perform the agreement according to a more convenient course of conduct—his proposed accounting offset. I reject this construction of Paragraph 8(a) as it ignores the plain meaning of the provision’s unambiguous terms and, if adopted, would violate the rule against surplusage.” (citations omitted).
The court noted that while Ian’s now-proposed option certainly had been one possible course, “Ian and the other parties, all represented by counsel, entered into a binding contract that spelled out a different route—one that specifically requires Ian to ‘repay the $4.2 million note from the Revocable Trust to the Dynasty Trust.’” (citation omitted).
The court also found that Ian had to indemnify the other beneficiary for her fees and costs incurred in this action, but that Ian himself was not entitled to indemnification.
Note: This firm represents the corporate trustee of the Dynasty Trust in this matter.
Estate of Burke v. Burke, No. 48, 2017 C.A. No. 10768 (August 24, 2017)
This case concerns an appeal to the Delaware Supreme Court in a case we previously blogged about. IMO Edward J. Burke Estate C.A. No. 10768-MA (August 10, 2016). In this case, the son of Edward Burke sued his stepmother over proceeds from the sale of a house to which he believed he and his siblings were entitled. However, the will of Edmond’s father (the “Testator”) specifically stated that his son was only entitled to the proceeds of the sale of the home after his stepmother passed away. The address of the home was stated in the will, making it a specific devise.
Last August, Master Avayzian ruled that the Testator’s son had no legal standing to sue his stepmother for the home sale proceeds as the house had been sold during the Testator’s lifetime with his knowledge. As such, Master Avayzian decided that the sale of the property constituted an ademption. The Testator’s son took exceptions to the Master’s ruling, but those exceptions were denied, and so, Vice Chancellor Glasscock entered summary judgment in favor of Edmond’s stepmother. In the Vice Chancellor’s bench ruling, Vice Chancellor Glasscock agreed that the specific devise of the property was adeemed at the time the property was sold and further decided not to reach the standing issue because a trial would have been futile. That is, if the stepmother were found to have breached her fiduciary duties by pulling money out of the Testator’s bank account prematurely and moving it to an account in her name, the Vice Chancellor would just order that she would have to put the money back into the Testator’s account, which in turn would flow back into his residuary estate, of which she is the sole beneficiary.
The Delaware Supreme Court agreed with the Vice Chancellor’s bench ruling and held that it would not address the standing issue because a trial would have been pointless. The Supreme Court, likewise, agreed that the devise of the specific property was adeemed, holding that “when a testator had disposed of real estate during her lifetime, such disposition works an ademption of the specific devise and the rights of devisees do not attach by way of substitution to the proceeds of its sale or to other property subsequently acquired by the testator.” The Testator’s son unsuccessfully argued that the ademption principal did not apply because he was to receive the “proceeds” of the sale. The Supreme Court, however, held that under Delaware law, the sale of property worked as an ademption on that devise, which in turn defeated any interest that might otherwise arise.
IMO Trust Created Under the Will of Harold S. Schutt C.A. #10574-MZ (July 17, 2017)
In this case, the testator’s trust, which was created under his will, contained language that left his estate to the more distant of his relatives, as opposed to his more immediate family members. The testator’s more immediate family members challenged the trust’s language, claiming that it was ambiguous as to which relatives would receive the testator’s estate.
Master Zurn, however, concluded that the trust language at issue was not ambiguous and noted that the testator explicitly explained that he favored his more distant relatives because he believed his more immediate family members were adequately provided for.
The testator’s trust was created under his will in 1960. The trust terminated when the last beneficiary died without issue, which was on June 17, 2013. Upon termination of the trust, the balance of the trust principal was to be paid in equal shares, per stirpes,
. . . to the person or persons who would have been entitled to inherit the same from me under the intestate laws of the State of Delaware pertaining to personal property of mine had I died at the time intestate, unmarried, possessed of such principal and not survived by any issue my said son Charles Porter Schutt by his wife Phyllis DuPont Schutt or by my nephew, David S. Foster, or any of his issues . . . .
The testator’s only living issue after the trust terminated was the issue of Charles Porter Schutt by his wife, Phyllis (the “Petitioners”). Unsurprisingly, the Petitioners filed the petition challenging the trust’s language. The respondents were members of the testator’s more distant relatives (i.e. the person or persons who would have been entitled to inherit under Delaware’s intestate laws had the testator and his brother had no issue at the time the trust terminated) (the “Respondents”). The Respondents are the issue of the testator’s first cousins.
The issue of the trust’s language was presented by both sides on a motion for summary judgment. Following oral argument on the matter, Master Zurn issued a draft report, of which the CPS Beneficiaries took exceptions. On July 17, 2017, Master Zurn issued her Final Report. In the Final Report, Master Zurn concluded, that it was undisputed that the class of intestate heirs described in the trust were bounded in some way, because the trust also described a third and fourth class of beneficiaries to take in the event the intestate class failed.
The Petitioners argued that the testator’s class of intestate heirs, as defined by Delaware law, was problematic because it could never fail, and that this created a latent ambiguity that justified looking into extrinsic evidence to interpret and limit the testator’s class of intestate heirs. Their support for their argument was that the testator’s attorneys that drafted the will were from Pennsylvania, and that it was unlikely that any Delaware attorneys worked on the will. More specifically, the Petitioners argued that at the time the will was drafted, Pennsylvania intestate law cut off consanguinity in a manner that, when combined with the other exclusions in the testator’s trust, would have limited the intestate class to the testator’s brother’s (Walter) two then-living sons, whose marital status, and issue made it conceivable at the time the testator drafted the trust that Walter’s line could have died out before the trust terminated, justifying the creation of a third and fourth class. As such, the Petitioners argued that the Pennsylvania attorneys likely thought that Delaware intestacy law did the same.
The Respondents argued that the trust was not ambiguous because if no intestate heir could be identified or found, such that the principal would escheat to the state, then and only then would the Petitioner take; and if they died out, then the trustees should give the estate to charity.
Master Zurn was unpersuaded by the Petitioners’ argument that a latent ambiguity was created simply because the Pennsylvania law firm was operating under the assumption that Delaware’s intestate laws mirrored Pennsylvania’s intestate laws. Essentially, the Master thought it was too much of a leap to conclude that a sophisticated law firm would have just copy-and-pasted a Pennsylvania will for a wealthy Delaware client. The Master further concluded that the trust was unambiguous, that each term had a meaning that was reasonable and consistent with the object and purpose of the testator’s will as a whole, and that there was a specific plan for the Petitioners to obtain the principal.
As mentioned above, the Petitioners took exceptions to these findings. Master Zurn dismissed those exceptions, issuing a final report dismissing their motion for summary judgment.
