Articles Posted in Trusts & Estates

by
Jesse Frederick-Conaway (“Jesse”) and Janice Russell-Conaway (“Janice”) were the original co-executors of the Estate of Everett T. Conaway (“Conaway”) and cosuccessor trustees of the Everett T. Conaway Revocable Trust (respectively, the “Estate” and the “Trust”). Janice was Conaway's widow, and Jesse was Conaway's adult son from another marriage. After intractable disputes arose, the Court of Chancery removed Janice and Jesse and appointed Kevin M. Baird, Esq. (“Baird”) as an independent successor administrator and trustee. Baird petitioned the court for instructions on whether certain of Jesse and Janice's transactions were proper. The Court of Chancery issued a Rule 54(b) order from which Jesse appealed and Janice cross-appealed. Jesse argued: (1) the Court of Chancery did not properly merge the administration of Conaway's Estate and Trust; and (2) the Court of Chancery erred in holding the Trust's interest in a limited partnership could be used to satisfy specific gifts where that the interest was subject to a contractual restriction on transfer and passed to Jesse as residuary beneficiary of the Trust. Janice's cross-appeal raised a question of whether the Court of Chancery abused its discretion by: (1) finding Janice liable for interest at the legal rate on $150,000 that the court determined she had received properly but prematurely; and (2) finding Janice liable for $77,987 she had improperly removed from the Estate, plus interest at the legal rate. After review, the Supreme Court affirmed those portions of the Court of Chancery's Order: (1) directing Jesse to return the Trust's 69% EJKC Limited Partnership interest, together with all interest and dividends paid thereon, to the Trust, to be treated as part of the residue of the Trust; and (2) finding Janice liable for amounts totaling $77,987 with interest at the legal rate. The Supreme Court reversed the determination that Janice's receipt of $150,000 in deferred payments owed to Conaway was proper. The Court also reversed the portion of the Court of Chancery's Order finding Janice liable for interest at the legal rate (as opposed to a rate applicable to funds on deposit) on the $150,000 she received. View "Frederick-Conaway v. Baird" on Justia Law

Posted in: Trusts & Estates

by
At issue in this appeal was whether five beneficiaries of a Delaware trust could recover on their $88 million judgment against the individual trust established by a brother to one beneficiary and uncle to the rest. The judgment arose from the trustee's alleged bad faith and willful misconduct in handling the estate. A Master held that a spendthrift clause in the trustee's Trust precluded the beneficiaries from obtaining relief against the Trustee's interest. The Court of Chancery found that the beneficiaries' notice of exceptions to the Master's final report on the spendthrift issue was late, and that they forfeited their right to challenge the ruling. The beneficiaries appealed, arguing the Court of Chancery erred by not considering the merits to the beneficiaries' exceptions to the Master's ruling on the spendthrift issue. View "Mennen. v. Fiduciary Trust International of Delaware" on Justia Law

Posted in: Trusts & Estates

by
Defendant-appellant-cross-appellee R.T. Vanderbilt Company, Inc. appealed a Superior Court judgment on a jury verdict of $2,864,583.33 plus interest to Plaintiff-appellees-cross-appellant Darcel Galliher, individually and on behalf of the Estate of Michael Galliher. The decedent, Michael Galliher, contracted and died from mesothelioma as a result of exposure to asbestos or asbestiform material while employed by Borg Warner at a bathroom fixtures facility. Vanderbilt provided industrial talc to Borg Warner, which was alleged to be the source of the substance that caused Michael's illness. At trial, Vanderbilt denied causation and claimed that Borg Warner was responsible because it did not operate the facility in a manner that was safe for employees like Michael. Vanderbilt argued: (1) the trial court erred when it failed to instruct the jury on the duty of care required of Borg Warner, as Michael's employer; and (2) the trial court erred when it failed to grant a new trial based on the admission of unreliable and inflammatory evidence that previously was ruled inadmissible. Galliher argued on cross-appeal that the trial court erred as a matter of law when it disallowed post-judgment interest for a certain period of months. The Supreme Court found that the trial court erred when it failed to provide any instruction to the jury on Borg Warner's duty of care to Michael, despite Vanderbilt's request that it do so. The trial court also abused its discretion when it denied Vanderbilt's motion for a new trial based upon the substantial prejudice resulting from the admission of evidence, not subject to cross-examination, that it had engaged in criminal conduct. Accordingly, the Court reversed the judgment and remanded for a new trial. View "R.T. Vanderbilt Company, Inc., v. Galliher, et al." on Justia Law

by
Petitions regarding several Peires family Trusts all requested that the Court of Chancery: (1) approve the resignation of the current trustees; (2) confirm the appointment of Northern Trust Company as the sole trustee; (3) determine that Delaware law governed the administration of each Trust; (4) confirm Delaware as the situs for each Trust; (5) reform the trusts' administrative scheme; and (6) accept jurisdiction over the Trusts. The Peierls' Petitions stemmed from their general frustration with Bank of America's lack of communication and responsiveness regarding the handling of Trust assets. Accompanying the Petitions were resignations of the Trusts' current trustees, all expressly conditioned upon approval by the Court of Chancery. The appointment of a new corporate trustee is also expressly conditioned upon approval by the Court of Chancery. In case number 11,2013, the Supreme Court upheld the Vice Chancellor's decision not to address the Petition in so far as it related to the 1960 Trusts, because New Jersey retained primary supervision over those Trusts. The Court held that the Vice Chancellor erred in determining that he could not exercise jurisdiction over the 1969 Trusts and address the Petition's merits. In case 12,2013: The Supreme Court concluded the Vice Chancellor properly concluded that no actual controversy existed relating to the approval of trustee resignations, the appointment of a new corporate trustee, the confirmation of Delaware as the situs, or the declaration that Delaware law governed the administration of the Trust at issue. Furthermore, the Court concluded the Vice Chancellor properly denied the requests to reform the Trust Agreement, and to retain jurisdiction over the Trust. In case 13,2013: because the Trusts were not then-currently being administered in Delaware, there was no basis to conclude that Delaware law would apply to the Trusts' administration. Therefore, whether the Court of Chancery could properly reform the Trust Instruments was a matter governed by the laws of the Trusts' administration. In this case, the laws were of Texas for the 1953 Trusts and New York law for the 1957 and 1975 Trusts. Because the Vice Chancellor properly concluded that he was "not in a position to address the requests for reformation," the Supreme Court affirmed the Vice Chancellor's decision to refrain granting reformation relief. View "Matter of: Ethel F. Peierls Charitable Lead Unitrust" on Justia Law

by
In two similar cases, Lincoln National Life Insurance Co. v. Joseph Schlanger Trust (Schlanger) and PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust (Dawe), an insurer sought a judicial declaration that a life insurance policy was void as an illegal contract wagering human life that accordingly lacked an insurable interest. The district court denied both motions to dismiss and certified three questions to the Supreme Court of Delaware concerning the incontestability provision under 18 Del. C. 2908 and the insurable interest requirement under 18 Del. C. 2704. The certified question, shared by both Dawe and Schlanger, concerned whether an insurer could claim that a life insurance policy never came into existence, on the basis of a lack of insurable interest, where the challenge occurred after the insurance contract's mandatory contestability period expired. The court answered in the affirmative and held that a life insurance policy lacking an insurable interest was void as against public policy and thus never came into force, making the incontestability provision inapplicable. The second certified question concerned whether the statutory insurable interest requirement was violated where the insured procured a life insurance policy with the intent to immediately transfer the benefit to an individual or entity lacking an insurable interest. The court answered in the negative, so long as the insured procured or effected the policy and the policy was not a mere cover for a wager. The third certified question concerned whether the relevant statutory provisions conferred upon a trustee an insurable interest in the life of the individual insured who established the trust if the insured intended to transfer the beneficial interest in the trust to a third-party investor with no insurable interest. The court answered in the affirmative, as long as the individual insured actually established the trust. If, however, the insured did not create and fund the trust then the relationship contemplated under section 2704(c)(5) was not satisfied. View "PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Trust, et al." on Justia Law

by
In two similar cases, Lincoln National Life Insurance Co. v. Joseph Schlanger Trust (Schlanger) and PHL Variable Insurance Co. v. Price Dawe 2006 Insurance Trust (Dawe), an insurer sought a judicial declaration that a life insurance policy was void as an illegal contract wagering human life that accordingly lacked an insurable interest. The district court denied both motions to dismiss and certified three questions to the Supreme Court of Delaware concerning the incontestability provision under 18 Del. C. 2908 and the insurable interest requirement under 18 Del. C. 2704. The certified question, shared by both Dawe and Schlanger, concerned whether an insurer could claim that a life insurance policy never came into existence, on the basis of a lack of insurable interest, where the challenge occurred after the insurance contract's mandatory contestability period expired. The court answered in the affirmative and held that a life insurance policy lacking an insurable interest was void as against public policy and thus never came into force, making the incontestability provision inapplicable. View "The Lincoln Nat'l Life Ins. Co. v. Joseph Schlanger 2006 Ins. Trust, et al." on Justia Law