Master Surcharges Former Trustee for Over $31,000 in Legal Fees and Costs but Dismisses All Other Exceptions

Robert E. Taglialatela, Jr. v. Phyllis T. Galvin, Trustee Irrevocable Trust of Robert E. Taglialatela, Sr., C.A. No. 5841-MA (February 23, 2015)

After dismissing all but a few exceptions to the Accounting of Robert E. Taglialatela Irrevocable Trust (the "Trust") filed by its former trustee, Phyllis Galvin-Moore, Master in Chancery Ayvazian adopted her draft report finding that in addition to the $30,787.25 in legal fees, costs, and commissions that the former trustee must return to the Trust, she must also return another $1,200 bringing the total to $31,987.25. The Trust, created in 1998 by Robert E. Taglialatela, Sr., held real property located in Oxford, MD and was for the benefit of Mr. Taglialatela's six children: Beatrice Juliano ("Beatrice"), Robert E. Taglialatela, Jr. ("Robert"), Phyllis Galvin-Moore ("Phyllis"), Diane Green, Francine Schmitt ("Francine"), and Elizabeth Gorman ("Beth"). Beatrice, Robert, and Beth are the beneficiaries who took exception to the accounting filed by former trustee, Phyllis.

Throughout Phyllis' time as Trustee, her relationship with her siblings, the beneficiaries, was contentious. The Court seemingly found the following facts. In 2008, Phyllis conveyed the property from the Trust into her father's name, and then roughly six months later, as power of attorney to her father, conveyed the property to herself in her capacity as Trustee. In 2009, the Court appointed a neutral professional guardian over Mr. Taglialatela, Sr. as a result of Phyllis seeking to have her father declared incompetent. Phyllis thereafter sued Beth for not paying back money that Phyllis had loaned her. That suit settled for $3,000 and due to Beth's financial inability to pay back the loan, Phyllis put a lien on Beth's share of the Trust. In December of 2009, Phyllis sent Beatrice an eviction notice, and later tried to propose a rental agreement for the property where Beatrice and her family had been living since 1988. Beatrice voluntarily left the property in June 2010.

Phyllis's attitude towards her siblings only continued after she was named executrix of her father's estate in July 2010. As the estate was insolvent, all of Mr. Taglialatela, Sr.'s personal property in Pennsylvania was sold at auction to pay creditors, one of whom was Phyllis. As a result, the family was forced to bid on the remaining sentimental items. Phyllis sold the Oxford, MD property with the net proceeds of the sale, $158,895.85, going into the Trust. Shortly before the sale, Robert filed a petition in the Court of Chancery to have Phyllis removed as Trustee "for threat of self-dealing and breach of fiduciary duty."

In three separate letters, Phyllis's Maryland attorney wrote to the beneficiaries informing them that Phyllis had been deducting her legal fees from the Trust to defend Robert's lawsuit. Her attorney further requested that the beneficiaries release Phyllis from liability in association with her role as Trustee, and that they all sign a settlement agreement or else she would be "forced to defend the pending litigation in Delaware." Since two of the beneficiaries refused to sign the settlement agreement, the third letter announced Phyllis's intent to accept service in the Delaware litigation and that "no disbursements from the Trust shall be made while the issues are being litigated in the Delaware court."

Fanning the fires of sibling discord, during this time Robert had been emailing Phyllis's employer accusing her of money laundering (or comingling funds, as he avers in his exceptions to the Master's draft report) and Phyllis was awarded an Order for Protection for Abuse in the Family Court of New Castle County in January of 2011. Phyllis answered Robert's petition over a year after it was originally filed and nearly a year after his motion for default judgment was filed in the same action. She also filed a counterclaim alleging that Robert's numerous lawsuits in three different states had depleted the Trust assets, but shortly before trial, she withdrew it. Master Ayvazian ultimately removed Phyllis as trustee because of "the intractable hostility between her and her other beneficiaries" and ordered Phyllis to file an accounting of her administration of the Trust from the date she sold the Oxford, MD property (November 17, 2010) to the date of the final order (May 16, 2013). The named successor trustee declined to serve, so the Court appointed Daniel T. Crossland, Esq. as Successor Trustee.

Beatrice, Robert, and Beth all took exceptions to Phyllis's accounting. At the hearing on the exceptions, the Court ordered Phyllis to file an amended accounting. The Court reviewed the accounting and affidavits of fees and sustained some of Robert's exceptions, and determined that $30,787.25 for legal costs and fees did not benefit the Trust. Also, the Court found that $7,443.49 of the $30,787.25 was erroneously calculated. As a result, Master Ayvazian recommended that the Court surcharge Phyllis the $30,787.25 for her breach of her fiduciary duty. All other exceptions were dismissed.

Beatrice and Robert then took exceptions to the Master's draft report. The Court dismissed all of Beatrice's exceptions because (1) most of her exceptions related to events that happened before her father's death and were thus, irrelevant to the accounting and (2) she did not show up to the second day of the hearing regarding the accounting, waiving her opportunity to make exceptions. Master Ayvazian upheld a couple of Robert's exceptions, in part, and suggested that the Court surcharge Phyllis an additional $1,200.00 in legal fees and costs paid by the Trust that did not benefit the Trust, but rather that were in association with Phyllis's defense against Robert's suits relating to her employment. The Court held, in its final report, that a total of $31,987.25 "must be returned to the Trust for the distribution to the beneficiaries" and all other exceptions were to be dismissed.

To read our blog post on the Master’s Report  about trustee removal, go to: http://www.gfmlaw.com/blog/master-chancery-recommends-removal-trustee-due-hostility