Vice Chancellor Grants Motion to Dismiss Petition that Sought to Force a Trustee Change
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.
