Master Holds that Successor Trustee did not Breach her Fiduciary Duty, and that Challenging Beneficiary did not Trigger No-Contest Provision of Trust Agreement by Seeking to Ensure Proper Administration of the Trust

Delaware Fiduciary Litigation Blog

Posted June 5, 2015

Margaret C. Ughetta v. Mary Harding Cist, Individually, as Executrix of Estate of John David Cist, and as Trustee of the Supp Trust Agreement of John David Cist. C.A. No. 7885-MA (May 29, 2015)

In this case, a co-beneficiary of an irrevocable trust contended that the successor trustee (also a beneficiary of the trust) should be removed for alleged breaches of her fiduciary duty. The co-beneficiary claimed that the successor trustee violated the terms of the trust concerning the selection and distribution of the trust’s tangible personal property (“TPP”) and the equalization process to be used for distributing the benefits of the trust. Additionally, the co-beneficiary claimed that the successor trustee acted hostilely and lacked impartiality when dealing with the co-beneficiary. In a counter-claim, the successor trustee claimed that by initiating litigation related to the trust the co-beneficiary triggered the no-contest provision of the trust agreement and, thus, forfeited 50 percent of her trust share.

The Master found that the trustor (father to all four beneficiaries of the trust) made several amendments to the trust during his lifetime, intending to ensure that each beneficiary received the trust’s benefits in the most equitable way possible. Following the trustor’s death, the co-beneficiaries attempted to reach an agreement on how to distribute the TPP. Upon failing to reach an agreement, the successor trustee hired an independent overseer (an experienced estate administrator) to help determine the TPP distribution process, as well as a certified public accountant to help finalize the equalization process. The challenging co-beneficiary made frequent objections and expressed dissatisfaction with the decisions reached by both the independent overseer and the CPA. However, the co-beneficiary ultimately participated and cooperated in the processes developed by both individuals. Following the completion of the TPP distribution and equalization process, the co-beneficiary filed this suit alleging that the successor trustee failed to abide by the provisions of an amendment to the trust concerning the distribution of the trust’s TPP to the beneficiaries. Furthermore, the co-beneficiary maintained that the equalization process used was “unreasonable and burdensome,” and that the successor trustee’s refusal to answer numerous requests made by the co-beneficiary showed that the successor trustee was hostile to the co-beneficiary, and affected her ability to act entirely fair during the administration of the estate and trust. The successor trustee filed a motion for summary judgment on the basis that the co-beneficiary failed to demonstrate that the successor trustee breached her fiduciary duty to any beneficiary in distributing the TPP, and in the equalization calculation used to determine the distribution of trust benefits. Furthermore, she argued that the co-beneficiary’s participation in the TPP distribution and equalization process showed that the co-beneficiary had acquiesced to the use of those procedures, and that her acquiescence estopped her from making any objections.

As to the distribution of the TPP, the Master determined that it was unnecessary to reach the issue of acquiescence because the co-beneficiary “failed to demonstrate the existence of a genuine issue of material fact regarding the successor trustee’s impartiality in distributing the TPP.” The Master, ruling for the successor trustee, explained that the trust described exactly what should happen if the co-beneficiaries were unable to agree upon a method of distributing the TPP, that the distribution process used by the experienced estate administrator was appropriate considering the terms of the trust, and that the co-beneficiary was “unable to point to any specific evidence of unfairness or lack of impartiality during the TPP distribution process.”

On the equalization process followed by the successor trustee, the Master found an ambiguity within the language of an amendment made by the trustor to the Supplemental Trust Agreement. Following “a basic rule of construction that a court will prefer an interpretation that gives effect to each term of an agreement and avoids rendering language superfluous or uselessly repetitive,” the Master determined that resolving the ambiguity required examining the extrinsic evidence of the trustor’s intent as to the equalization process to be used. The evidence showed that the successor trustee’s decisions related to the ambiguity were based on the information and records provided by the trustor during his lifetime. Therefore, the Master ruled that the successor trustee “did not breach her fiduciary duty when she completed the equalization process started by” the trustor.

The no-contest provision issue presented perhaps the most notable aspect of this case. The Master determined that the co-beneficiary did not trigger the no-contest provision of the trust by initiating this litigation. The Master pointed to the “distinction between a challenge to the propriety of the trustee’s actions and an attack on the provisions of the trust itself.” The Master explained that the co-beneficiary was not seeking to alter the provisions of the trust, rather she was “attempting to enforce the provisions regarding the TPP distribution and the equalization process according to their terms” as she interpreted them. Given that the successor trustee herself acknowledged the ambiguity of certain terms, the Master found it reasonable that the two parties had reached different conclusions as to how that language should be interpreted. Since the co-beneficiary “has not challenged the disposition or validity of the trust,” and because “courts do not view disputes over the interpretation of instruments as violating a no-contest clause,” the Master concluded that the co-beneficiary’s suit did not trigger the no-contest clause.


William M. Kelleher, Director
Gordon, Fournaris & Mammarella, P.A.
Henry Meldrum – Law Clerk