August 2016

Posted August 17, 2016

IMO Edward J. Burke Estate C.A. No. 10768-MA (August 10, 2016)

This is case involves a stepson who sued his stepmother, the attorney-in-fact of her late husband and the executrix of his estate, for breaches of fiduciary duties owed to her dead husband. The stepson alleged that the stepmom improperly took the proceeds from the sale of a property that was specifically gifted to him and his siblings in his father’s will and that she took money from a joint bank account that was created while she was his attorney-in-fact. The stepmom moved for summary judgment, arguing that, while the property was a specific gift to his children, her husband sold that property during his lifetime and, thus, that gift had lapsed. She further argued that adding her name to her husband’s accounts had no effect on the stepson because even if she had not added her name to the accounts, she would have inherited that money under the residuary clause in the will.

Master Ayvasian ruled in favor of the stepmother on all counts. She concluded that the specific devise of the property had failed because it was sold during the husband’s lifetime and that ademption had occurred (i.e. when a specific gift of real or personal property in a will is no longer available for delivery to a named beneficiary or beneficiaries because the testator lost or conveyed it prior to his death).  Even if the proceeds from the sale of the property could be traced to a specific bank account, the Master held that cash is not considered a substitute for real property. She held that, under Delaware law, the father knew that the will contained a specific devise of the property and that when he sold that property, that sale reflected the father’s intent to revoke the devise.  With regards to the stepmom adding her name to the bank accounts, the Master held that it made no difference because the stepson was not entitled to any of the assets from the accounts.

Posted August 16, 2016

Mario Alberto Lopez Garza, The Executor of the Estate of Hans Jorg Schneider Sauter v. Citigroup, Inc. C.A. No. 15-537-SLR (June 29, 2016)

Mario Alberto Lopez Garza, the executor of a Mexican estate, the Estate of Hans Jorg Schneider Souter (the “Estate), initiated probate proceedings in Mexico claiming that  Banco Nacional de Mexico, S.A. integrante del Grupo Financiero Banamex (“Banamex”) in Mexico, a wholly-owned, indirect subsidiary of Citigroup, Inc. (“Citigroup”), was holding the Estate’s funds. This Mexican probate action was stayed upon Banamex’s initiation of proceedings to determine the authority of the probate judge.  After that, the executor sued Banamex and Citigroup, in the United States District Court for the Southern District of New York on behalf of the Estate. After the court denied the Estate’s motion for leave to file a second amended complaint on the basis of futility, the Estate voluntarily dismissed the New York action. Subsequently, in an effort to access information as to the funds purportedly belonging to the Estate, the executor brought suit against Citigroup in the United States District Court for the District of Delaware, seeking an accounting. Citigroup filed a motion for judgment on the pleadings.

Citigroup argued, and the Court found, that the executor had not substantively alleged that the Estate was entitled to an accounting and, thus, failed to state a claim. Delaware courts have routinely ruled that an accounting is not so much a cause of action as it is a form of equitable relief. While Mr. Garza contended that Delaware case law allows an accounting to be a stand-alone claim, the court found that his case law was not on point. The court concluded that Delaware allows claims for accounting only when they arise out of contractual or fiduciary relationships between the parties. Mr. Garza then suggested that either New York or Mexico law would apply; however the Court found that New York law also holds that “a fiduciary relationship must be alleged to sustain a freestanding claim of an accounting.” The Court declined to address the application of Mexican law, as Mr. Garza did not cite one that would allow the Estate to seek an accounting from Citigroup in the United States.

Posted August 2, 2016

William V. Erhlich, Jr., Trustee of the William V. Ehrlich Trust U/W/D May 5, 1977, as Amended v. Jeffrey Ehrlich and Vinn, LLC C.A. No. 11364-MA (July 25, 2016)

The trustee of a Trust distributed real property to a beneficiary. Before the property was distributed, the trustee asked the beneficiary to execute a confirmatory easement in order to clarify an easement held by a neighboring property and to provide notice to subsequent buyers. No confirmatory easement was ever executed despite numerous attempts by the parties’ attorneys to address the issue. According to the Petition, the Trustee, in his capacity as trustee, made the final distribution of the Trust on December 5, 2013, conveying the property at issue to the beneficiary free and clear of trust with the belief and understanding that the beneficiary would address the easement issue after the property was distributed to him. However, the beneficiary refused to engage in any further discussions.

Among other things, the Trustee sought: (1) a declaration that beneficiary’s parcel remains subject to the easement; and (2) the return of the real property to the Trust so that the trustee could distribute a corrected deed for the parcel reflecting the easement. The beneficiary moved to dismiss.

The Master concluded that the Trust lacked standing to bring the claims. The Master concluded that the owner of the neighboring property has the legally protected interest at issue and, thus, the claims are its to bring, if it so chooses. In making an allowance for the owner of the neighboring parcel to file the claims, the Master explained that “Court of Chancery Rule 17 provides that no action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed for the substitution of such party.” The Master recommended an allowance of 90 days for that to happen in this case.