October 2017
Douglas W. du Pont v. Wilmington Trust Company C.A. No. 12836-VCS (October 6, 2017)
In February 2016, Petitioner requested that Wilmington Trust Company (“WTC”) resign as Trustee of trusts of which Petitioner is the current beneficiary. WTC refused to voluntarily resign. Petitioner then filed a petition to remove Wilmington Trust Company as trustee and appoint Charles Schwab Trust Company of Delaware as trustee (the “Petition”). The Petition seeks an order removing WTC as trustee pursuant to 12 Del. C. § 3327(3) and appointing a successor trustee—either Charles Schwab Trust Company of Delaware (“Charles Schwab”) or a “suitable alternate successor trustee.”
WTC filed a motion to dismiss the Petition pursuant to Court of Chancery Rule 12(b)(6). The Court of Chancery, per Vice Chancellor Slights, granted WTC’s motion to dismiss and dismissed the Petition with prejudice. For the purpose of reaching its ruling, the court presumed that all well-pleaded allegations in the Petition were true.
In his effort to change trustee, the Petitioner made several allegations in the Petition: (1) that WTC mis-administered the trusts; (2) that WTC improperly acted as a lender that overextended credit to him, (3) that WTC gave him poor estate planning advice; and (4) that WTC had greatly changed as a company since WTC was named as trustee of the trusts in the 1940s and 1950s. Petitioner argued that 12 Del. C. § 3327(3) warranted the removal of WTC because a “substantial change of circumstances has occurred”, because WTC was unfit, unwilling or unable to serve as trustee, and because there was hostility between WTC and the Petitioner.
The court found that neither Petitioner’s allegations regarding “federal-government investigations, lawsuits, and indictments” nor the fact that in recent years M&T acquired WTC constituted a substantial change in circumstances.
Further, the Court found that it was not reasonably conceivable that WTC was unfit, unwilling, or unable to adequately continue as trustee. In so doing, the Court noted that one miscalculation of a distribution was not sufficient to show a “pattern of indifference.”
Regarding the loan to Petitioner, the court found that Petitioner consented to that, and noted law holding that as long as the transaction is fair to the beneficiary, a trustee can lend a beneficiary money. Likewise, the court found that Petitioner had consented to WTC’s role as estate planner and that the Petition did not adequately state any claims on that issue that would constitute unfitness.
Lastly, the court cited well-established law finding that “mere lack of confidence in a trustee by the beneficiaries, or the existence of friction between them, is not a sufficient ground for removal of a trustee.” With that in mind, the Court found that the Petition contained no allegations that would suggest that it was impossible for the trustee to perform its duties. As such, hostility was not adequately pleaded.
For all of those reasons, the Court dismissed the Petition on the basis it failed to state a claim.
IMO the Estate of Richard L. DeGroat, deceased C.A. No. 12738 (October 2, 2017)
In this case, a child of the decedent’s first marriage (the Petitioner) questions the extent to which the Decedent intended to benefit the Decedent’s second ex-wife. The Petitioner alleges that in the Decedent’s final years, the second ex-wife utilized a power of attorney to name herself beneficiary of several of the Decedent’s accounts, influenced the Decedent to execute a deed to convert co-ownership of real property with the Decedent from tenants in common to joint tenants with the right of survivorship, and sold the property and retained all the proceeds while the Decedent was still alive.
In this opinion, the court, per Master Zurn, addressed a July 3, 2017, motion to compel; Petitioner’s July 5, 2017, motion to amend the complaint; the defendant’s August 2, 2017, motion to dismiss; and the Petitioner’s August 15, 2017, motion to strike portions of the defendant’s deposition errata sheet. This opinion represented the Master’s recommendations on all these motions. In sum, the Master recommended that the court grant the motion to amend in part and deny it in part, grant the motion to compel, and deny the motion to strike. The Master viewed the motion to dismiss as a motion for summary judgment and consequently deferred decision on that motion to allow for additional submissions.
On January 11, 2012, Decedent executed a will that gave a specific gift of personal property to Decedent’s granddaughter, and divided the remaining estate among Decedent’s five children. Lucinda was the Decedent’s second wife, but they divorced in 2008. Lucinda is now married to someone else. In 2001, seven years before Lucinda and Decedent divorced, Lucinda and Decedent purchased a home at 3 Somerset Lane, Newark, DE 19711 (“the Property”) for $350,000.00, which they owned as tenants by the entirety. Lucinda and Decedent’s 2008 divorce converted that ownership into tenancy in common. They divorced without any written divorce decree or agreement addressing the Property.
One of the Decedent’s sons is the Petitioner. Petitioner alleges that Lucinda (who was much younger than Decedent) learned about a 2012 will that divided nearly all the estate between the Decedent’s five children, the only exception being a specific gift to one of the grandchildren. Petitioner further alleges that Lucinda induced Decedent to execute a power of attorney naming Lucinda as agent on December 2, 2013. That will directed the executor (who is the Petitioner) to sell any real estate and to institute a partition action necessary to sever any interests with “my ex-wife Lucinda.”
Petitioner alleges that Lucinda learned about this will and induced Decedent to execute a power of attorney naming Lucinda as agent on December 2, 2013. Petitioner alleges Lucinda improperly used this power of attorney to designate herself as beneficiary of several of Decedent’s investment accounts and life insurance policies. Petitioner contends Decedent intended for those assets to pass to his children, grandchild, and first wife Jan. He also contends that Lucinda moved Decedent out of property that he owned and into an assisted living facility, that she thereafter sold that property, and that she kept the $402,361.72 in proceeds from that sale.
Petitioner sought to amend his petition to add Lucinda’s present husband based on allegations that he assisted in the wrongful acts. Finding no undue prejudice, and noting the generally liberal standard to amend, the Master recommended allowing the addition of Lucinda’s present husband as a defendant. But the Master recommended denying Petitioner’s effort to add one of his siblings and decedent’s first wife as additional plaintiffs because they did not verify the petition.
Petitioner alleges counsel represented Lucinda in 2012 and 2013, and assisted Lucinda and Decedent with retitling the Property via a deed dated January 23, 2013. Petitioner moved to compel production of that counsel’s file, arguing Lucinda placed her communications with that counsel at issue by testifying about them, that counsel witnessed the deed such that his communications about it are not privileged pursuant to Delaware Rule of Evidence 502(d)(5), and that Lucinda waived the privilege by sharing communications with counsel in document production and at her deposition. In her deposition, Lucinda defended the 2013 deed by asserting she and Decedent were following counsel’s instructions. Lucinda testified that her counsel told her and Decedent that their joint ownership of the house “disappeared” after their divorce, and that upon learning that, she and Decedent agreed to restore joint ownership. The Master noted that Lucinda testified that counsel told her that he could represent both Lucinda and Decedent in the deed preparation so long as Decedent was not otherwise represented by counsel. The Master recommended that the court grant the motion to compel on the basis that Lucinda’s explanation as to how she learned she no longer had an interest in the Property, why Decedent obtained a competency evaluation, and the circumstances under which the January 2013 deed was executed, relies heavily on counsel’s alleged advice to Lucinda. In short, Lucinda had placed the communications at issue.
Lastly, the Master recommended denying Petitioner’s motion to strike errata sheets. The Master noted that Chancery Rule 30(e) allows substantive changes post-deposition, the changes were timely, and even if the sham affidavit doctrine applied (and it very well may not), the Petitioner failed to meet the standards of that doctrine.
