Court of Chancery Affirms Dismissal of Creditor’s Trust Challenge Against Delaware Asset Protection Trust, But On Different Grounds
In the matter of the CES 2007 Trust, C.A. No. 2023-0925-SEM (October 1, 2025)
In a recent decision, Vice Chancellor Laster of the Delaware Court of Chancery dismissed a creditor’s challenge to a Delaware Asset Protection Trust (DAPT), affirming the magistrate’s recommendation but on different grounds. While the Magistrate thoroughly analyzed whether the trust complied with the statutory framework for a DAPT, the Vice Chancellor clarified that the creditor’s lack of standing deprived the Court of the subject-matter jurisdiction necessary to reach the merits of the case, rendering the Magistrate’s conclusions advisory and unnecessary to the outcome.
As discussed in a previous blog post, the dispute arose from a $14 million judgment in Michigan against developer Craig Schubiner by Can IV Packard Square, LLC (the “Lender”). The 2019 judgment resulted from an unpaid loan to one of Schubiner’s business entities. Seeking to collect the judgment, the Lender brought an action in Delaware against the CES 2007 Trust (the “Trust”), a DAPT created by Schubiner, as the grantor, alleging that the Trust was a sham and seeking to invalidate the trust or, at a minimum, its spendthrift provision.
The Vice Chancellor determined that the Lender lacked standing and therefore declined to reach the merits of the case. He noted that, although the Magistrate’s report was only advisory, its analysis appears correct. In that report, the Magistrate found that the Trust satisfied Delaware’s statutory requirements for a valid DAPT and concluded that the Lender failed to state a claim to invalidate the Trust or its spendthrift provision. Emphasizing that the Lender made a loan to one of Schubiner’s entities, not to the Trust itself, the Vice Chancellor characterized the Lender as a “classic intermeddler.” He concluded that there was “no connection between the Trust and any injury that may have resulted from the transfers,” noting that the Trust’s assets remained unchanged and no harm was traceable to it. Although the Trust owns a 90% interest in the entities, the Lender’s claims concerned transfers between Schrubiner and his entities, not the Trust.
For Delaware trust practitioners and asset protection planners, this case serves as an example of how Delaware courts rigorously enforce the protections under Delaware trust law, especially against third-party creditor challenges. The decision reveals that merely showing that a trust owns or controls entities indebted to a creditor is insufficient to establish standing, suggesting that creditors must demonstrate a direct transfer from the creditor to the trust. Even where a DAPT’s validity might be substantively challengeable, a plaintiff’s failure to establish a concrete, traceable injury will end the case before those issues are reached.
This blog entry was primarily authored by Llewellyn Oliver Robinson and Christina Smith.
