Debra Rende and Paula Lombard v. Frank Rende ( 2023 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
DEBRA RENDE and PAULA )
LOMBARD, as Co-Trustees of the June E. )
Rende Revocable Trust U/D/T date June )
10, 2015, as amended, )
)
Petitioners, )
)
v. ) C.A. No. 2021-0734-SEM
)
FRANK RENDE, )
)
Respondent. )
MASTER’S FINAL POST-TRIAL REPORT
Final Report: February 23, 2023
Date Submitted for Final: December 12, 2022
Draft Report: October 5, 2022
David J. Ferry, Jr. and Thomas R. Riggs, FERRY JOSEPH, P.A., Wilmington,
Delaware; Counsel for Petitioners.
Dean A. Campbell, LAW OFFICE OF DEAN A. CAMPBELL, P.A., Milton,
Delaware; Counsel for Respondent.
MOLINA, M.
This case arises from the administration of the June E. Rende Revocable Trust
U/D/T dated June 10, 2015 (the “Trust”) and June E. Rende’s estate (the “Estate”).
June E. Rende (the “Decedent”) died on September 6, 2021, leaving behind three
adult children, who are the parties in this case: Frank Rende (the “Respondent”),
Debra Rende, and Paula Lombard (together with Ms. Rende, the “Petitioners”,
together with the Respondent, the “Parties”).1 The Parties are serving as co-trustees
of the Trust and were nominated as co-executors of the Estate, but are at an impasse.
The Petitioners contend the Respondent breached his fiduciary duties to the
Decedent and seek his removal as fiduciary and judgment to recoup alleged damages
he caused to the Trust and the Estate. The Respondent contends it is the Petitioners
who have breached their duties and should be required to provide accountings and
return certain property to the Estate.2 The Respondent also claims ownership of
certain assets of the Trust and the Estate.
The Parties are no strangers to litigation. Several claims presented in this
action have already been presented in, or are closely related to, prior actions in the
Superior Court and the Family Court. It is unfortunate that the Parties’ relationship
1
Docket Item (“D.I.”) 78, p.11.
2
The rift between the Parties has grown so wide that all attempts for resolution have failed
and future attempts seem highly unlikely. See Tr. 69:20-71:10 (referencing failed
settlement efforts), Tr. 213:16-20 (referencing the pain felt by the Respondent and the rift
between the Parties).
devolved to the level demonstrated in these proceedings. The Decedent, I am sure,
expected and wished for better. But her wish to have all three of her children serve
as co-fiduciaries is unworkable.
After a trial on the merits, I find: (1) the Respondent should be removed as
co-trustee; (2) the Petitioners should be required to provide accountings, as further
explained herein, but may continue to serve as co-trustees of the Trust; (3) the
Respondent’s share of the brokerage account should be released to him less the
unpaid loans; and (4) the Estate should continue to be administered by the appointed
neutral representative. This is my final report.3
I. BACKGROUND4
The twists and turns in the Parties’ contentious relationship are, at times,
difficult to follow. Actual and perceived slights between the Parties spurred
litigation, changes to the Decedent’s estate planning documents, and the Parties’ use
of, and claims to, the Decedent’s real and personal property. Herein I attempt to
unravel the mess the Parties created. I begin by looking to the Decedent’s wishes as
3
This final report makes the same substantive findings and recommendations as my draft
report, to which exceptions were filed. The exceptions are addressed in footnotes where
appropriate; as explained herein, I find they should be overruled and denied. This report
also rules on the request for interim relief filed after my draft report was issued.
4
The facts in this report reflect my findings based on the record developed at trial on May
3, 2022. See D.I. 88. I grant the evidence the weight and credibility I find it deserves.
Citations to the trial transcripts are in the form “Tr. #.” The Parties’ jointly submitted
exhibits are cited as “JX __.”
2
reflected in her estate planning documents.5 Then I address how those wishes were
(or were not) carried out by the Parties.
A. The Decedent’s estate planning
It is unclear when the Decedent first engaged in estate planning. Sometime
before 2014, per Ms. Lombard, the Decedent executed a power of attorney through
which Ms. Lombard was appointed as the Decedent’s agent.6 Around that same
time, per Ms. Lombard, the Decedent executed a will appointing Ms. Lombard as
executrix.7 But Ms. Lombard and the Decedent became estranged thereafter,
beginning sometime in 2014.8
While Ms. Lombard was estranged, the Respondent and Ms. Rende took a
more active role in the Decedent’s life, leading to changes in the Decedent’s estate
planning in 2015. The Respondent explains that he and Ms. Rende attended a
5
The Parties all testified as to their understanding of the Decedent’s wishes. See, e.g., Tr.
91:20-23. But I find her estate planning documents most informative for a few reasons.
First, when it comes to her final wishes, Delaware law dictates that the Decedent’s will is
the end of my inquiry. See Rambo v. Fischer, 2022 WL 4180890, at *9 (Del. Ch. Sept. 13,
2022). Second, it appears each of the Parties had a period of estrangement from the
Decedent. See, e.g., Tr. 13:21-23 (Lombard). And third, each side, as one might expect,
invokes the Decedent to support their cause. Although some invocations are more credible
than others, I decline to make unnecessary credibility determinations based on secondhand
accounts and, again, look to the documents the Decedent executed regarding and reflecting
her final wishes. Cf. Tr. 165:15-166:18.
6
Tr. 16:7-10. These earlier documents are not, however, in the record.
7
Id.8
Tr. 13:21-14:4.
3
seminar regarding estate planning through trusts, which he thought was “good
advice,” so he “put [his] mother onto it and [they] created the [T]rust.”9 Ms. Rende
contacted the law firm of Gordon, Fournaris & Mammarella, P.A. (“GF&M”) and
the firm prepared and the Decedent executed the original version of the Trust on
June 10, 2015.10 This original version is not in the record. But the Respondent
testified that “it was a trust for [the Decedent], and [Ms. Rende] and [the
Respondent] were the trustees.”11 Although Ms. Lombard was not named as co-
trustee, the Trust, as it exited in 2015, did not exclude her as a contingent
beneficiary.12
Then, in early 2019, Ms. Lombard came back into the Decedent’s life. Ms.
Lombard testified that, on March 14, 2019, the Decedent called “crying and say[ing]
she misse[d]” Ms. Lombard.13 This compelled Ms. Lombard to drive to the
Decedent’s home, where she reunited with the Decedent and found various estate
planning documents (presumably the 2015 documents).14 Ms. Lombard then took a
9
Tr. 181:21-182:1.
10
JX III, Ex. 1. The Decedent also executed a will and power of attorney. Id.11
Tr. 182:22-23.
12
JX III, Ex. 1. But see Tr. 182:24-183:1 (the Respondent) (testifying that he believed Ms.
Lombard was not mentioned in the 2015 version of the Trust).
13
Tr. 15:12-17.
14
Tr. 15:18-23. But see Tr. 183:13-18 (the Respondent) (testifying “the house was rifled
through, the drawers were all rifled through”).
4
more active role in the Decedent’s life; she became the Decedent’s power of attorney
and helped the Decedent move.15 Ms. Lombard contacted GF&M and, with the
firm’s assistance and the Decedent’s involvement, the Trust was amended on May
23, 2019.16
Ms. Lombard’s involvement spurred numerous disputes. In August 2019, Ms.
Lombard helped her mother move and ended up with “a carload full of
Presumably, it was around this time when Ms. Lombard found the Decedent’s
handwritten note regarding loans the Decedent made to the Respondent in the total amount
of $14,627.10. Tr. 89:14-20. See also JX FFF. The Petitioners doubt the document reflects
all of the loans the Decedent made to the Respondent and neither believes the Decedent
would have forgiven the loans. See Tr. 89:14-22; 162:21-23. Ms. Rende was more
unequivocal, testifying that the loans “were not paid back.” Tr. 172:16-19. The Respondent
does not deny that these loans were made to him and testified that he knew all about the
handwritten note, which the Decedent presented to him. Tr. 271:9-18. But he represents
that the Decedent told him not to worry about repaying the loan because it was his money
anyway. Tr. 271:9-24. The Respondent never had the Decedent reduce this purported
forgiveness to writing. Tr. 272:1-10.
15
See Tr. 112:16-22; JX Z. But see JX III, Ex. 1 (reflecting the intent to appoint Ms.
Lombard and the Decedent’s grandson, Nicolas Rende, as co-agents).
16
Ms. Lombard admitted that she was upset with the original version of the Trust because
she felt excluded. Tr. 16:4-10. See JX III, Ex. 1. Michael M. Gordon, Esquire from GF&M
explained at his deposition that he personally spoke with the Decedent and Ms. Lombard
on April 30, 2019 and drafted new estate planning documents to ensure equal treatment of
the children, which was one of the Decedent’s goals. JX III, p.9-13. During that
conversation, the Decedent expressed an interest in further protecting the Respondent’s
share of her estate through a trust. JX III, p.13-14, Ex. 1. Per Mr. Gordon “there were some
concerns with spending and perhaps creditor issues for [the Respondent] and [the
Decedent] just really wanted to make sure his one-third would be protected and be available
to him for the remainder of his lifetime.” JX III, p.14. GF&M prepared new documents
that the Decedent executed. JX III, p.17. Those documents included a will, trust, and power
of attorney. Id.; JX III, Ex. 1.
5
merchandise.”17 On August 21, 2019, the Decedent filed an affidavit for an
emergency ex parte order with the Family Court alleging that Ms. Lombard “came
to Delaware and took all valuable items from” the Decedent’s real property.18 The
Decedent further alleged abuse, propensity for violence, and made other concerning
allegations about Ms. Lombard.19 But the Decedent and Ms. Lombard settled the
action on September 5, 2019 and it was voluntarily dismissed.20
17
Tr. 86:7-18.
18
JX X, p.3-12. The Respondent admitted it was his handwriting on the filing and that the
Decedent and Ms. Rende “just let [him] do it, like [he’d] done everything as long as [he]
can remember.” Tr. 186:19-20. Shortly before the Family Court action, the Decedent
signed a handwritten document revoking the power of attorney through which Ms.
Lombard was appointed. See Tr. 112:16-22; JX Z.
19
JX X, p.9.
20
JX X; JX Y. Through the settlement, Ms. Lombard was required to “advise where all
tangible personal property and household furnishing removed from the [Decedent’s real
property] are now located, to the best of her knowledge,” return “any tangible personal
property or household furnishings from the [Decedent’s New Jersey property]” which Ms.
Lombard removed, and return a vehicle and “[a]ny of the Petitioner’s assets under the
possession or control of” Ms. Lombard to the New Jersey property. JX Y. The Respondent
testified that Ms. Lombard did not return any items, except certain stock. Tr. 188:11-16.
But the Respondent also admitted that he “didn’t see [Ms. Lombard] take [the Decedent’s]
stuff. [He] wasn’t there.” Tr. 189:6-7. Ms. Lombard appears to admit that she did not return
the items; rather, she told the Respondent to “[c]ome up and get the stuff,” but he failed to
do so from September 2019 through November 2020, when the New Jersey property was
sold. Tr. 87:2-6. Ms. Lombard testified that she did not remove any property from the New
Jersey property that she was required to return. Tr. 140:17-24.
Certain jewelry and a tea set are at issue in this proceeding. Ms. Lombard testified
that the Decedent gave her “costume jewelry” and “a tea set from [Ms. Lombard’s]
grandparents” on March 14, 2019. Tr. 85:24-86:6. But see Tr. 187:14-19 (the Respondent)
(testifying: “I know it was very valuable. My grandmother Roberts, who was most of the
jewelry in there . . . had top quality things. Like, not little diamonds, big expensive
diamonds”); Tr. 187:23-24 (the Respondent) (explaining that the family “heard for 30 years
how [the tea set] was $75,000 in 1990”). See also Tr. 206:2-7 (the Respondent) (“There’s
6
Thereafter, the Parties seemed to come together. On September 6, 2019, Mr.
Gordon spoke to the Parties, without the Decedent. He “thought it was a productive
phone conference,” and that the Parties had decided to put their differences aside.21
Thus, GF&M prepared new estate planning documents, which would require the
Parties to work together jointly to assist and support the Decedent.22
The Parties and Mr. Gordon met in person on October 1, 2019 for the
Decedent to sign the new estate planning documents, which included the Trust, a
durable power of attorney (the “POA”) and a last will and testament (the “Will”)
(together, the “Final Plan”).23 Through the Final Plan, the Decedent relinquished
control over the Trust in favor of her children (the Parties) serving as co-trustees for
her benefit, and set forth a plan for her children (the Parties) to also administer the
Estate, jointly; ultimately, she wished for them to also share jointly in the Estate.24
a safe that [Ms. Lombard] hauled out in March full of cash and all [their] grandmother’s
expensive things that are gone.”). Ms. Rende testified that the Decedent gave the tea set
and jewelry to Ms. Lombard in May of 2019, before the move in August 2019. Tr. 159:18-
160:9. When confronted that her contemporaneous notes seemed to suggest otherwise, Ms.
Rende testified that she had “that wrong. The tea set was already gone.” Tr. 174:18-19; JX
NN.
21
JX III, p.18.
22
Id. at p.21-23.
23
See Tr. 21:16-21. Per Mr. Gordon, the Decedent understood the documents and “was
also very happy about . . . her three children being able to work together.” JX III, p.23.
24
Mr. Gordon explained that “[s]ince his representation of [the Decedent] commenced, it
was pretty clear to [him] that she wanted all three children to be treated equally.” JX III,
p.24.
7
Specifically, the final version of the Trust provided that the Decedent would
be the sole beneficiary of the Trust during her life and upon her death the Trust’s
assets would pass equally to the Parties.25 The Decedent named the Parties as co-
trustees “acting together and not separately.”26 She expressed her “intent that while
[her] children are serving as Trustees of [the] Trust, any action to be taken by the
Trustees must be with the unanimous consent of [the] children.”27 The POA
contained the same limitation that the Parties act “together, and not separately[;]”
the Parties were only authorized to act “with the agreement of all other joint
agents.”28 And, finally, through the Will, the Decedent bequeathed tangible personal
property to the Parties equally and the residue to the Trust.29 She appointed the
Parties as co-representatives to serve and administer the Estate “jointly.”30 These
documents remained in place until the Decedent’s death on September 6, 2021.
25
JX T, p.2.
26
Id. at p.16-17.
27
Id. at p.16-17. Ms. Lombard testified that she felt the unanimous requirement protected
the Decedent. Tr. 19:17-24. Ms. Rende, however, “had doubts about it” because she
wondered “[h]ow can three be unanimous?” Tr. 154:5-15. She was not sure it would
“[w]ork smoothly.” Tr. 154:18-20. Mr. Gordon agreed; the requirement of unanimous
consent from three co-fiduciaries was unusual and he had “some concern that . . . it could
potentially cause some problems.” JX III, p.19-20.
28
D.I. 5, Ex. C.
29
JX U, p.1.
30
Id. at p.5.
8
B. After the Final Plan
When the Parties began serving as co-trustees under the Trust and co-agents
under the POA on October 1, 2019, the Decedent had substantial assets. The
Decedent had interests in two pieces of real property, 641 Adams Drive in Milton,
Delaware (the “Milton Property”), and 486 Stonetown Road in Ringwood, New
Jersey (the “Ringwood Property”).31 The former was an asset of the Trust, the latter
was in the Decedent’s name.32 The Decedent also had a brokerage account and two
IRAs.33 The brokerage account was an asset of the Trust; the IRAs were in the
Decedent’s name.34 The Decedent also personally owned a 2006 Acura (the
“Vehicle”) and other tangible personal property.35
The Parties dispute the use, treatment, or disposition of the Ringwood
Property, brokerage account, IRAs, and the Vehicle during the Decedent’s life. I
address these categories in turn. Issues with the Milton Property, it appears, did not
arise until after the Decedent passed; they are addressed below.
31
See Tr. 26:22-24.
32
See id.
33
See Tr. 26:24-27:4.
34
Tr. 27:1-4.
35
Tr. 27:5-7.
9
1. The Ringwood Property
The Ringwood Property was sold in November of 2020 for $350,000.00.36
The purchase was financed in part with the buyer providing a $200,000.00 down
payment and the Decedent lending the buyer the remaining $150,000.00 through a
mortgage earning interest at five (5) percent per annum.37 Ms. Lombard testified
that the funds from the down payment went into a WSFS checking account (the
“WSFS Account”).38 The WSFS Account was in the Decedent’s name and listed
Ms. Rende as the sole beneficiary.39 At the time of the Decedent’s death, less than
one (1) year after the sale, the WSFS Account had a balance of $36,865.00.40
36
Tr. 27:12-24. It appears it was sold on the Decedent’s behalf by the Parties as her agents
under the POA. Tr. 27:12-29:15.
37
Tr. 27:16-24. See also JX B; JX D.
38
Tr. 142:22-143:4.
39
JX I; JX Q, p.2. It is unclear who had access to the WSFS Account and there are no
statements from the WSFS Account in the record.
40
JX DD; D.I. 91, p.28. At trial, counsel to the Respondent identified a discrepancy
regarding the balance of the WSFS Account. Tr. 9:13-18. Although this issue was not
addressed directly at trial, the Petitioners represented in their post-trial brief that the WSFS
Account “was worth $8,235.79 at the time of [the Decedent’s] death.” D.I. 92, p.20.
Nevertheless, I continue to use the date of death value from the evidence introduced at trial.
The mortgage was paid off after the Decedent died, by the end of December 2021.
Tr. 28:1-3. Ms. Lombard accepted payments made towards the mortgage after the
Decedent’s death (from October through December 2021) and provided those funds to
Leslie DiPietro, Esq., the administrator of the Estate, minus reimbursements to Ms.
Lombard for taxes and other out-of-pocket expenses she paid on behalf of the Estate. Tr.
28:14-17; D.I. 78, p.12. There appears to be no dispute about the sufficiency of Ms.
Lombard’s payment or the claimed credits.
10
2. The brokerage accounts
When the Parties began serving as co-trustees and co-agents, the Decedent
held investments in an account with TD Ameritrade (the “Ameritrade Account”).41
In October 2019, the Ameritrade Account was valued at $3,993,693.23 and titled in
the name of the Trust.42 But in late October or early November 2019, the Respondent
transferred the securities in the Ameritrade Account to an account with Interactive
Brokers, LLC (the “IBKR Account”).43 Ms. Lombard knew of the transfer to the
IBKR Account beforehand and testified that the Respondent wished to move the
funds because “he didn’t like the way he was treated at TD Ameritrade.”44 Per the
Respondent, the Decedent wanted the securities transferred and participated actively
in the process.45
Motivations aside, the Parties were all informed before the transfer.
Unbeknownst to the Petitioners, however, the Respondent opened the IBKR
41
Tr. 33:23-34:5. See JX Q (reflecting Ms. Rende as the beneficiary).
42
JX GGG, p.1.
43
Id.; JX HHH. See also Tr. 94:10-13 (affirming that Ms. Lombard has “not sued [the
Respondent] for anything that’s missing that [she] claim[s] he’s taken”). It appears that
around $60,000.00 was left in the Ameritrade Account, but there is no dispute about those
funds. See Tr. 93:18-94:13.
44
The Respondent went a step further in his testimony, representing that the Petitioners
had access to the IBKR Account right after it was opened. Tr. 270:14-22. But Ms. Lombard
testified that, despite knowing it would be opened and that she should have been involved,
she did not have access until January 2020. Tr. 42:21-43:13.
45
Tr. 193:4-18.
11
Account in the Decedent’s name, not the Trust’s.46 And once the securities were in
the IBKR Account, the Respondent began an aggressive investing strategy, which
he did not disclose to, nor seek agreement on from, the Petitioners.47 He decided to
trade on margin, “borrow[ing] money from the broker to buy stock” through
numerous transactions.48 The Respondent testified that he “monitored [the IBKR
Account] every single day, every single second when the stock market was open.”49
In addition to monitoring the IBKR Account, the Respondent researched the stock
market and developed strategies on what to buy and sell.50 At the end of November
2019, the IBKR Account had a balance of $3,823,674.09.51
46
Tr. 35:1-36:17, 268:23-269:3. The Respondent testified that he and the Decedent
transferred the account together. Tr. 268:6-10.
47
The Respondent admitted that he did not tell the Petitioners that he would be margining
the account. Tr. 270:2-4 (“I didn’t tell them anything. Why would I tell them? They don’t
even talk to me. They can’t stand me.”). Although the Respondent clearly has an interest
in investing and trading, he testified that he has no formal training regarding investing but
has traded actively for 30 years. Tr. 274:1-5. See also Tr. 192:3-8 (the Respondent)
(explaining that the Decedent “became less and . . . less enthusiastic about her account”
which “hurt [him] inside”).
48
Tr. 195:3-6. Per Black’s Law Dictionary, a margin account is “[a] brokerage account
that allows an investor to buy or sell securities on credit, with the securities usually serving
as collateral for the broker’s loan.” Margin Account, Black’s Law Dictionary (11th ed.).
The Respondent contends margin trading “wasn’t risky” but admits that he needed
to “watch the account every second of the day.” Tr. 255:1, 256:20-22. See also JX S. The
Respondent further admitted that he “knew” a certain transaction “was dangerous”. JX S,
p.1.
49
Tr. 194:7-10.
50
Tr. 197:2-8.
51
JX HHH, p.1.
12
Ms. Rende was the first to discover that the Respondent had margined the
Trust’s assets, sometime in the middle of December 2019.52 Ms. Rende testified that
the Respondent offered her five (5) percent of what he made to “keep [her] mouth
shut” and not tell Ms. Lombard or the Decedent about his activities.53 Ms. Rende
declined and, instead, shared her discovery with Ms. Lombard and the Decedent; per
the Petitioners, the Decedent was upset by the news.54 Ms. Lombard also contacted
an attorney (presumably Mr. Gordon) to understand how the Respondent was
investing without input from the Petitioners.55 The Respondent continues to believe,
however, the Petitioners did not need to be included in his investment plan and the
Decedent was on board.56
52
Tr. 157:16-24. Ms. Rende testified that she found out about the Respondent’s margining
“a day or two after December 20th of 2019.” Tr. 157:23-24. Her recollection appears off.
Cf. Tr. 96:2-5.
53
Tr. 158:24-159:8.
54
Tr. 37:13-15, 158:18-23. The Respondent disagrees and testified that the Decedent knew
he was margining “the whole time, and she was excited and happy, and she was
participating in her account, and she was enjoying it.” Tr. 279:12-17.
55
Tr. 37:15-17. Mr. Gordon testified, in his opinion, that if the IBKR Account was a trust
account, it would not have been appropriate for the Respondent to act “unilaterally” to
trade in the account, “[i]t would have required the participation of the other two siblings or
[the Decedent] would have had to take that action on her own.” JX III, p.28.
56
See Tr. 198:22-24, 279: 12-17. The Respondent was adamant that his investment plan
was set up to provide each of the Parties “1600 shares each free of Home Depot.” Tr.
208:22-209:1. When asked whether margin trading was a prudent thing to do for the
Decedent, the Respondent admitted his investing “wasn’t for [the Decedent]. It was for [the
Parties].” Tr. 257:21-22. He testified that he was “absolutely” investing for himself and his
sister, until opposing counsel asked: “Do you know as a fiduciary you’re not supposed to
do that? You’re supposed to be doing things for the benefit of the person to whom you’re
13
On December 18, 2019, the Parties spoke with Mr. Gordon on the phone to
discuss the future of the IBKR Account.57 The Respondent described the meeting
as a surprise attack “from all angles.”58 But he agreed that the meeting ended in a
resolution: securities in the IBKR Account would not be traded but rather would be
held for a year and a day.59 The Parties and Mr. Gordon also discussed, after that
holding period, cashing out the IBKR Account and dividing it into LLCs held by the
Parties.60 That plan was not fully consummated.61
But, thereafter, the Respondent could no longer margin the IBKR Account
because he no longer had access thereto.62 This concerned him, because the
Petitioners were unfamiliar with margining and the IBKR platform.63 The
Respondent testified that he “asked 50 times what’s happening,” but the Petitioners
a fiduciary?” Tr. 257:23-258:7. Then he changed his tune: “I did do it for the benefit of
[the Decedent].” Tr. 258:8. His about-face was not credible.
57
Tr. 198:11-200:8. See also JX III, Ex. 3 (regarding a June 30, 2020 follow up meeting).
58
Tr. 198:18.
59
Tr. 198:24-199:2.
60
JX III, p.32; JX S, p.3-4; Tr. 200:2-8.
61
Per Ms. Rende, the Respondent would not sign the documents to confirm the agreement.
Tr. 155:9-15. The Respondent confirmed as much, testifying that he did not agree to the
proposed distribution. Tr. 243:11-19. Per Mr. Gordon, “it was not completed because there
was not agreement amongst the three children as to how to allocate funds to the respective
LLCs.” JX III, p.35.
62
Tr. 199:3-8. The Respondent testified that he was “[l]ocked out of everything as far as
knowledge of anything that’s going on.” Tr. 199:11-12.
63
Tr. 199:16-23, 43:24-44:4.
14
would not tell him.64 This testimony conflicts with the numerous records introduced
at trial showing the Respondent’s continued involvement.65 Still, the IBKR Account
had a balance of $4,339,731.73 at the end of December 2019, an increase of
$516,057.64 from the November 2019 ending balance.66
Despite their disputes over the Respondent’s handling of the IBKR Account,
the Parties were able to come together as co-trustees to purchase real property at
9202 Shore Drive in Milton, Delaware (the “Shore Drive Property”) in February
2020. The Parties purchased the Shore Drive Property for $405,000.00 on behalf of
64
Tr. 199:6-8.
65
See JX HH. This involvement was largely in connection with margin calls. Securities
purchased on margin are subject to margin calls from the brokerage, which are a “securities
broker’s demand that a customer put up money or stock as collateral when the broker has
financed the purchase of securities. A margin call usually occurs when the market prices
of the securities are falling.” Margin Call, Black’s Law Dictionary (11th ed.).
On the night of December 18, 2019, a margin call occurred on the IBKR Account.
Tr. 120:18-21. The margin call was for $159,700.00 and resulted in that amount of stock
being sold from the IBKR Account. JX BB. Ms. Lombard did not know how to deal with
the margin call and reached out to the Respondent in an email on December 26, 2019. JX
GG. The Respondent replied via email the next day, providing instructions on how to deal
with the situation. JX HH. But Ms. Lombard testified that she still did not know how to
use the IBKR platform and did not trust the Respondent’s advice on how to resolve the
situation. Tr. 121:10-15. It is unclear what, if anything, the Petitioners did regarding the
margin call. A second margin call occurred several months later, in March, 2020. JX H.
This second margin call resulted in 19 transactions from the IBKR Account, totaling a sale
of $824,744.82. Id.
66
JX HHH. The Respondent believes the increase should have been even greater. Tr.
204:20-23.
15
the Trust, using funds from the IBKR Account.67 There is no dispute that the Shore
Drive Property was titled in the name of the Trust but that it was purchased largely
for the Respondent’s use and enjoyment.68
But the waters did not stay calm for long. On December 9, 2020, the
Respondent filed a civil action in the Superior Court against the Decedent (the
67
Tr. 32:1-8; JX DDD. Ms. Rende accessed and withdrew the funds from the IBKR
Account. Tr. 32:1-8. See also JX A. Currently, the Shore Drive Property has an
approximate market value of $475,000.00. D.I. 78, p.13.
68
Tr. 83:2-6, 155:20-24, 245:23-246:5. The extent of the Respondent’s interest in the Shore
Drive Property is in dispute. Ms. Lombard testified that she agreed to the purchase “as
long as [the Respondent] pays his expenses and that [the Shore Drive Property] goes in the
[T]rust.” Tr. 31:21-24. In her words, the Shore Drive Property was for the Respondent’s
“use, and he was to pay the expenses. But it was owned by the [T]rust.” Tr. 32:9-12. She
disagreed that it was “understood that [the Respondent] was to inherent [sic] the house.”
Tr. 134:20-23. Ms. Lombard testified, rather, that the Respondent would have to buy the
Petitioners out if he wanted the Shore Drive Property. Tr. 136:2-5. Ms. Rende testified that
the Parties would have to unanimously agree to sign over the Short Drive Property to the
Respondent. Tr. 156:6-11.
The Respondent’s claimed interest in the Shore Drive Property changed numerous
times. Initially, in his discovery responses he averred: “Decedent sold the Shore Drive
property to me. The contract was provided in Respondent’s Production of Documents.” JX
JJJ. But no such contract was introduced and at trial he renounced any such claims. Tr.
249:8-16. And even at trial he could not keep his position straight. At various times the
Respondent testified that he “bought that house,” the Shore Drive Property was given to
him by the Decedent, and that “[e]veryone knows it was given - - that it was [his] house
that [he] bought,” or that the house was bought “with the money [he] earned.” Tr. 251:7-8.
Nonetheless, the Respondent admits that the Shore Drive Property is in the Trust’s name,
and he has no documentation to prove he was meant to be the sole owner. Tr. 245:11-
246:13. Yet he contends “that house was going to go to [him] anyway.” Tr. 245:17-18. See
also Tr. 251:17-18 (“It’s in the trust because it’s going to go to me upon my mother’s
death.”). But see JX KK (explaining “I did not get a house . . . It’s in Mom’s trust. . . not
my name.”).
Ms. Lombard also testified that the Respondent did not pay any taxes or insurance
for the Shore Drive Property as the Parties agreed he would. Tr. 67:19-68:5.
16
“Superior Court Action”).69 Through the Superior Court Action, the Respondent
claimed that he and the Decedent had an agreement that the Respondent could
margin trade on the IBKR Account and retain the benefits therefrom.70 The Superior
Court Action was dismissed with prejudice on May 21, 2021.71
69
JX V. In his complaint, the Respondent averred that on or about November 26, 2019, he
and the Decedent entered into an agreement that the Respondent could “access, and profit
exclusively from any ‘profit’ made using available ‘margin’ in [the Decedent’s] brokerage
[account].” Id. He claimed the Decedent was enriched by 2.2 million dollars. Id. Sometime
in 2020, the Respondent also tried to get guardianship of the Decedent. See Tr. 239:18-
240:24. He was unsuccessful, however, because he could not obtain the required
physician’s affidavit. See Tr. 240:1-5; Ct. Ch. R. 175(c)(4).
From 2019 through 2021, the Respondent also filed petitions for protection from
abuse against the Petitioners on his own behalf and on behalf of the Decedent. See JX X.
All such actions were dismissed with prejudice. Id.
70
Tr. 232:20-234:13. The Respondent did not attach any written agreement to his pleadings
in the Superior Court Action but produced one in this action. Compare Rende v. Rende,
S20C-12-013 MHC, D.I. 1 with JX EEE. The agreement is dated October 26, 2019, written
by the Respondent and signed by the Respondent and the Decedent and provides:
I June Rende, hereby offer avail “margin” in Ind/Trust/IRA’s, to be used by
Frank Rende. Frank Rende is responsible for all costs/profits. If loss occurs
Account will be + or - adjusted after 12/3/2020. If profit, it is to be Frank
Rende’s discretion how to access said gains + invest. This agreement is
between June Rende + Frank Rende ONLY. Said profits will go in New Trust
btwn June Rende (mother) + Frank Rende (son).
JX EEE. Ms. Lombard testified that she had no knowledge of this agreement. Tr. 46:3-
47:11. Ms. Rende testified that the Decedent was “so upset” when she learned that the
Respondent had margined the securities in the IBKR Account. Tr. 158:18-21. But see JX
S, p.9 (“I had mom sign an agreement giving me permission to Use her margin to get on
my feet.”); id. at p.25 (“Why do you think I had mom sign a contract? She changes her
mind every week or Two.”).
71
JX W. The Respondent testified that the dismissal was not on its merits but rather because
he did not appear. Tr. 281:3-7. But, at the request of the Parties, I have taken judicial notice
of the Superior Court Action, particularly D.I. 23 and 29. See Tr. 291:5-9 (explaining that
I would “read the motion for judgment on the pleadings, any written response – although
there doesn’t appear to be one – but then the transcript from that argument hearing”). See
17
The Respondent testified, confusingly, that the Decedent directed, approved
of, or otherwise agreed with the Respondent’s goals in the Superior Court Action.72
Although the goals evidenced on the docket of the Superior Court Action were
monetary relief (he sought over $2 million), he testified that what he really wanted
was access to the IBKR Account.73 I find this representation unbelievable.74
also D.R.E. 202(d)(1)(C). That record confirms that the Decedent, through counsel, moved
for judgment on the pleadings on April 16, 2021, arguing the Respondent failed to plead
an enforceable contract because the alleged agreement lacked consideration (the alleged
agreement was completely one-sided with no benefit to the Decedent). D.I. 23. The
Respondent never responded but appeared at the noticed hearing, where he argued
adamantly that he never received the motion and would not willingly ignore a request to
dismiss the Superior Court Action because it was important to him. Rende v. Rende, S20C-
12-013 MHC, D.I. 29 at 2:10-19. At the hearing, the Respondent testified much like he did
at trial—that everyone knew he was always expected to get paid for his investing efforts.
Compare Rende v. Rende, S20C-12-013 MHC, D.I. 29 at 14:3-10. with Tr. 262:13-18.
Ultimately, Judge Conner ruled from the bench, granting the motion because the agreement
lacked consideration. Rende v. Rende, S20C-12-013 MHC, D.I. 29 at 18:1-4. Judge Conner
confirmed the dismissal was “with prejudice.” Rende v. Rende, S20C-12-013 MHC, D.I.
29 at 18:19-21.
72
See Tr. 260:5-261:14. But see Tr. 124:1-2 (Ms. Lombard) (“After my brother sued my
mother in December of 2020, she was very, very upset.”).
73
Tr. 234:2-5.
74
See, e.g., Rende v. Rende, S20C-12-013 MHC, D.I. 29 at 19:9 (“I’m owed this money.
I’m going to try to vacate this judgment, because I have been stabbed.”). See also Tr.
262:13-22 (“Q. . . . [A]re you claiming you’re entitled to something for the trading that you
did under that contract? A. I think I am, because I was promised to be paid. Q. Under that
contract that we talked about; right? A. Not just the contract, I was promised verbally to be
paid.”).
18
Nevertheless, this action has provided some access, reflected in the following
chart:75
IBKR Account
Date Controlling Parties Net Asset Value Increase/Decrease
November 30, $3,823,674.09
The Respondent N/A
201976 (Starting Balance)
The Respondent
December 31, until December 19,
$4,339,731.73 +$516,057.64
201977 2019, then the
Petitioners
October 1,
The Petitioners79 $3,681,385.69 -$658,346.0480
202078
November 6,
The Petitioners82 $14,068.94 -$3,667,316.75
202081
December 25,
The Petitioners84 $0.00 -$14,068.94
202083
75
The Respondent argues that information from December 18, 2019 to December 31, 2019
is missing. See Tr. 196:1-11. The Respondent testified that the IBKR Account balance was
approximately $500,000.00 lower on December 31, 2019 than when he relinquished
control on December 19, 2019. Tr. 204:18-23.
76
JX HHH.
77
JX H.
78
Id.
79
But see Tr. 128:13-129:10.
80
Records for the IBKR Account also reflect disbursements totaling $655,000.00. JX H
(showing $405,000.00 disbursed on February 13, 2020, $50,000.00 on July 15, 2020, and
$200,000.00 on July 15, 2020).
81
JX AAA.
82
But see Tr. 128:13-129:10, 43:24-44:4.
83
JX UU.
84
But see Tr. 128:13-129:10, 43:24-44:4.
19
As this chart shows, the value of the IBKR Account increased during the
Respondent’s stewardship and decreased after his removal. But the increase was not
without additional fees. The Trust owed commissions of $7,609.43 for trades made
in November 2019, $7,498.81 for trades made in December 2019, and $170.46 for
trades made in 2020.85 The Trust also owed margin interest of $1,264.09 for
November 2019, $5,597 in December 2019, and $39,929.97 in 2020.86 The
Decedent also incurred a federal income tax obligation of $234,125.00 in 2019 and
a Delaware state tax obligation of $52,183.00 in 2019 as a result of the investing.87
The commissions, interest, and tax obligations were less during the Petitioners’
stewardship.88
In October or November 2020, Ms. Lombard decided to transfer the Trust
securities from the IBKR Account to a new account with Fidelity (the “Fidelity
Account”).89 The Fidelity Account shows securities transferred in and a net portfolio
balance of $4,003,127.03 by November 30, 2020.90 The securities remained in the
85
JX HHH; JX UU.
86
JX HHH; JX U.
87
JX R.
88
Compare JX BBB and JX CCC with JX R.
89
Tr. 33:18-20.
90
JX E.
20
Fidelity Account until the Decedent passed.91 The date of death value was
$4,267,659.95.92
3. The IRAs
The Decedent also had an IRA and a Roth IRA with Fidelity (the “Fidelity
IRAs”).93 Ms. Lombard admitted that she opened the Fidelity IRAs on the
Decedent’s behalf and that the Decedent initially wanted the Fidelity IRAs to inure
to the benefit of the Parties equally.94 But, per Ms. Lombard, after the Respondent
filed the Superior Court Action the Decedent “changed the IRAs.”95 Later in her
testimony, however, Ms. Lombard admitted that she was the one who changed the
beneficiary designations “[u]nder [the Decedent’s] instruction,” for which she does
91
Tr. 33:21-22. Since the Decedent passed, the Petitioners have both received their 1/3
share of the securities in the Fidelity Account, but the Respondent has received nothing.
Tr. 128:6-9; D.I. 78, p.13. Fidelity has withheld these funds pending a ruling on any
damages caused by the Respondent. Id.
92
JX DD.
93
D.I. 78, p.13. The Decedent also had an IRA conversion account with TD Ameritrade,
which named the Respondent and Ms. Rende as 50/50 beneficiaries. Id.
94
Tr. 125:11-3; Tr. 91:20-23, 92:12-21. See also JX III, p.26 (Gordon) (“She did have a
retirement account and the recommendation was to have that payable to the three children
equally for income tax planning purposes.”).
95
Tr. 92:18-19.
21
not have any documentation.96 Since the Decedent’s passing, the Petitioners have
both received full distributions from the Fidelity IRAs.97
4. The Vehicle
The Parties also dispute ownership of the Vehicle. In a January 7, 2020 email,
the Respondent averred he had been promised the Vehicle “[s]ince 2013.”98 But he
acknowledged the Decedent had not sold or otherwise transferred title to him at that
time.99 He added: “I could have gotten it changed over, just by asking [the Decedent]
at [the] right time…im [sic] not that type [of] person!”100 But he was that type of
person, after all. The Respondent introduced a handwritten document dated January
96
Tr. 125:14-126:3. Ms. Rende attempted to back up Ms. Lombard’s testimony but was
unconvincing. Initially, Ms. Rende testified that the Decedent wanted to remove the
Respondent from everything after he filed the Superior Court Action. Tr. 165:20-166:7.
But when asked specifically if the Decedent wanted the Respondent to be removed from
the Fidelity IRAs, she backed off explaining: “I don’t know too much about that – they
might have just been overlooked when they were in TD because I never knew about them.”
Tr. 166:11-15. She then attempted to revert: “So [the Decedent] wanted to change them,
I’m sure, if, you know, she was aware of them.” Tr. 166:17-18. Mr. Gordon testified that
distribution of the Fidelity IRAs to only two beneficiaries “would not appear to be
consistent with [the Decedent’s] wishes.” JX III, p.45. But he acknowledged that the
Decedent could have decided to make such a change and accomplish same without
GF&M’s assistance. JX III, p.47-48.
97
Tr. 128:2-5.
98
JX PP.
99
Id.
100
Id.
22
26, 2020, which was signed by the Decedent and provided: “I June Rende sell 2006
Acura TL for $1 to Frank Rende Jr.”101
In or around March of 2020, the police arrested the Respondent and returned
possession of the Vehicle to the Decedent.102 The Respondent, in turn, filed
protection from abuse petitions against the Petitioners in Family Court seeking
return of the Vehicle or $12,000.00 for its loss.103 Commissioner Southmayd
dismissed the Respondent’s petitions on their merits and warned “[t]he PFA statute
is not a shortcut for all legal claims one may have against family members. [The
Respondent] is warned that subsequent frivolous petitions may result in
sanctions.”104 Despite his representations before the Family Court regarding the
value of the Vehicle, the Respondent was cagey during trial, testifying that he
“assume[s]” it was worth more than $1.00 but he has “no idea.”105
101
JX XX. Tr. 212:14-213:3, 85:12-15.
102
Cf. JX X (reflecting the date of the Respondent’s arrest as April 7, 2022).
103
Id.
104
Id.
105
Tr. 253:6-9. It appears Ms. Rende is now in possession of the Vehicle. Tr. 214:5-12.
23
C. After the Decedent’s death106
Issues with the Milton Property arose after the Decedent’s death on September
6, 2021. By way of background, the Decedent moved to Delaware in 2011 or 2012
and purchased the Milton Property jointly with her boyfriend Jacob Roll.107 Mr. Roll
passed in 2014.108 Under the terms of Mr. Roll’s will, the Decedent had an option
to purchase Mr. Roll’s share of the Milton Property for $100,000.00.109 The
Petitioners attempted to exercise that option after the Decedent’s death but they did
not obtain the Respondent’s agreement.110 As such, Mr. Roll’s estate would not
complete the sale.111 The Petitioners have set aside $100,000.00 in escrow, so that
the transaction can be completed, pending approval by all three co-trustees or an
order removing the Respondent as co-trustee.112
106
The Respondent testified that “the date after [the Decedent] died,” Ms. Rende “stole
$2,000.00” from the Respondent. Tr. 212:11-13. But he has not pled any claim for relief
related thereto.
107
Tr. 22:12-19. Ms. Rende moved into the Milton Property before the Decedent and Mr.
Roll passed to assist them with their needs. See Tr. 150:23-151:24.
108
Tr. 22:20-21.
109
JX G.
110
Tr. 24:14-21.
111
Tr. 25:3-14.
112
Tr. 25:15-18.
24
At the Respondent’s request I am also taking judicial notice of the Register of
Wills docket.113 The Petitioners, through counsel, filed the Will with the Register of
Wills on September 29, 2021, noting they were “uncertain if probate will be
necessary.”114 Later on October 28, 2021, the Petitioners filed a petition to serve as
administrators of the Estate.115 The Respondent objected and counter-petitioned on
November 5, 2021.116 That afternoon, the Chief Deputy for the Sussex County
Register of Wills issued a letter exercising her discretion to appoint a neutral third
party to serve the Estate until this dispute is resolved.117 Leslie DiPietro, Esquire
was ultimately appointed.118 The claims period expired on May 6, 2022, and the
Register of Wills docket reflects two claims: one filed by Mr. Roll’s estate and one
filed by Ms. Lombard.119 The inventory was filed on May 13, 2022 reflecting
probate assets of $253,196.96.120
113
Tr. 291:13-17. See Arot v. Lardani, 2018 WL 5430297, at *1 n.6 (Del. Ch. Oct. 29,
2018) (citing 12 Del. C. § 2501; D.R.E. 202(d)(1)(C)) (“Because the Register of Wills is a
Clerk of the Court of Chancery, filings with the Register of Wills are subject to judicial
notice.”).
114
See In re Rende, 24315 (“ROW”), D.I. 2-3.
115
See ROW, D.I. 4.
116
ROW, D.I. 5.
117
ROW, D.I. 6.
118
ROW, D.I. 8.
119
ROW, D.I. 9, 11, 14.
120
ROW, D.I. 16.
25
D. Procedural History
On August 25, 2021, the Petitioners filed a petition seeking to remove the
Respondent as co-trustee and co-agent alleging that the Respondent breached his
fiduciary duty.121 Unfortunately, the Decedent passed away shortly thereafter, and
the Petitioners filed an amended petition on October 9, 2021 to remove the mooted
count seeking removal of the Respondent as co-agent.122 The amended petition also
added several counts: (1) seeking the removal of the Respondent as co-personal
representative of the Estate, (2) claiming unjust enrichment, (3) seeking an
accounting, and (4) seeking the imposition of a constructive trust.123 On November
2, 2021, the Respondent filed an answer asserting multiple affirmative defenses and
three counterclaims for (1) breach of fiduciary duty by the Respondents, (2) an
accounting, and (3) specific performance on transfers of real and personal
property.124 The Respondents filed an answer to the counterclaims, closing the
pleadings, on November 30, 2021.125
121
D.I. 1.
122
D.I. 5.
123
Id.
124
D.I. 6.
125
D.I. 10.
26
On January 14, 2022, I granted the proposed case scheduling order, teeing this
action up for trial on May 3, 2022.126 But the discovery process proved difficult. On
January 24, 2022, the Petitioners filed a motion to compel discovery from the
Respondent.127 The Respondent responded with a countermotion on January 27,
2022.128 Soon after, on February 4, 2022, the Petitioners filed a motion to strike the
Respondent’s response to the Petitioners’ request for admissions.129 The Petitioners
also filed motions to quash two subpoenas duces tecum: one directed to Thomas E.
Gay, Esq. and one directed to Mr. Gordon.130 And the Respondent filed a motion
seeking an interlocutory order requiring the Petitioners to provide an accounting for
the Trust’s funds.131
These motions were all resolved before trial. On March 8, 2022, I denied the
motion to strike and the motion for an interlocutory order.132 The next day, during
a telephonic hearing, I denied the motions to quash both subpoenas.133 I also
126
D.I. 18.
127
D.I. 24.
128
D.I. 29. The Respondent also filed a motion for court-ordered mediation and
continuance of trial. D.I. 30. The motion was denied in part, with regards to the court-
ordered mediation, and the issue of the continuance was withdrawn during the hearing on
March 9, 2022. D.I. 54, 58.
129
D.I. 36.
130
D.I. 40, 41.
131
D.I. 49.
132
D.I. 55, 56.
133
D.I. 58.
27
instructed the Parties to meet and confer on the remaining disputes.134 This meet
and confer was successful and all disputes were resolved by March 25, 2022.135
A one-day trial was held on May 3, 2022.136 After trial, the Petitioners and
the Respondent submitted motions for interim relief.137 I ruled on the motions
together, denying them in an order dated June 27, 2022.138 After post-trial briefing,
I issued my draft report on October 5, 2022.139 Respondent filed exceptions and
renewed his motion for interim relief.140 Exceptions were fully briefed on December
12, 2022 and the renewed motion for interim relief is ripe for consideration.141
II. ANALYSIS
The Parties’ various disputes consist of (1) claims for breach of fiduciary duty,
(2) contests over property rights, and (3) various loose ends. Regarding the first, the
Parties each bring claims for breach, seeking accountings, removal, or damages. For
the second, the Parties dispute claims to (1) the Shore Drive Property (or,
alternatively, the Fidelity IRAs), (2) the Vehicle, and (3) personal property retained
134
Id.
135
D.I. 69.
136
D.I. 88.
137
D.I. 83, 84.
138
D.I. 95.
139
D.I. 91, 92, 96.
140
D.I. 97-98.
141
See D.I. 102-103, 106.
28
by Ms. Lombard. As to the loose ends, I address the outstanding balance in the
Fidelity Account, the complications regarding the Milton Property, the loans to the
Respondent, and how the Trust and the Estate should move forward after the
remedies awarded herein. I address these disputes in turn.
A. The Parties each owed fiduciary duties as co-trustees and some
were breached.
The Petitioners argue the Respondent breached his duties as co-trustee; the
Respondent argues the reverse.142 “A claim for breach of fiduciary duty requires
proof of two elements: (1) that a fiduciary duty existed and (2) that the [fiduciary]
breached that duty.”143
A party bringing a claim for fiduciary breach generally ha[s] the burden
of proving each element, including damages, of each of [his] causes of
action . . . by a preponderance of the evidence. [P]roof by a
preponderance of the evidence means that something is more likely
than not. By implication, the preponderance of the evidence standard
also means that if the evidence is in equipoise, the Plaintiff[ ] lose[s].144
Thus, the Petitioners bore the burden of proving the Respondent breached his duties,
and vice versa.
142
Although the Petitioners originally brought claims under the POA, those were removed
after the Decedent’s death. D.I. 5. See also Rambo, 2022 WL 4180890 (discussing the
limitations on challenges for breaches of fiduciary duties under a power of attorney
following the principal’s death).
143
Beard Research, Inc. v. Kates, 8 A.3d 573, 601 (Del. Ch. 2010).
144
In re Happy Child World, Inc., 2020 WL 5793156, at *10 (Del. Ch. Sept. 29, 2020)
(citations and quotation marks omitted) (alterations in original).
29
“Under default principles of Delaware law, a trustee owes fiduciary duties to
a beneficiary.”145 “At common law, the duties of a trustee to trust beneficiaries
include loyalty, good faith, and due care.”146 Trustees also owe “a duty to furnish
information to a beneficiary upon reasonable request.”147 But, with some
limitations, “the terms of a governing instrument may expand, restrict, eliminate, or
otherwise vary . . . [a] fiduciary’s powers, duties, standard of care, rights of
indemnification and liability to persons whose interests arise from that
instrument.”148 Trustees must also act within the scope of authority granted by the
governing trust documents.149
Here, the Parties serve as co-trustees of the Trust and have owed the common
law duties of loyalty, good faith, and due care from the date of their appointment:
October 1, 2019. They are also required to adhere to the terms of the Trust. The
Trust provided, in pertinent part, that the Parties, as co-trustees act “together and not
145
Tigani v. Tigani, 2021 WL 1197576, at *13 (Del. Ch. Mar. 30, 2021).
146
In re Nat’l Collegiate Student Loan Trs. Litig., 251 A.3d 116, 185 (Del. Ch. 2020)
(citations and quotations omitted).
147
Tigani, 2021 WL 1197576, at *15 (citations and quotation marks omitted).
148
12 Del. C. § 3303.
149
Ross v. Freeman, 180 A. 527, 532 (Del. Ch. 1935).
30
separately.”150 The Trust required that “any action to be taken by the Trustee . . . be
with the unanimous consent of [the Parties.]”151
With these duties and limitations established, I turn to the alleged breaches.
1. The Respondent exceeded his authority and breached his
duty of loyalty; as such, he should be removed as co-trustee.
I find the Respondent exceeded the scope of his authority under the Trust and
breached his duty of loyalty. Starting with the former, the Respondent admitted that
he acted unilaterally to implement his investment plan by margining the IBKR
Account. He was not authorized to act individually and, as such, exceeded his
authority, in breach of the Trust. The Respondent also acted outside the scope of his
authority by setting up the IBKR Account in the name of the Decedent, rather than
the Trust. Those securities were assets of the Trust, and the Trust did not grant the
Respondent any authority to convert those assets; neither did the Decedent retain
such authority. The Respondent admitted that he set up the IBKR Account; thus, he
should be held responsible for the improper titling.152
The Respondent also breached his common law duty of loyalty and engaged
in self-dealing. “As a part of the duty of loyalty, a trustee must exclude all selfish
150
JX T, p.16.
151
Id. at p.16-17.
152
See Tr. 268:23-269:6, 43:15-18.
31
interest and all consideration of the interests of third persons.”153 “[S]elf-dealing
occurs when the fiduciary has a personal interest in the subject transaction of such a
substantial nature that it might have affected his judgment in material connection.”154
Trustees owe a duty to “administer trust property solely in the interests of the
beneficiary.”155 If the Petitioners prove self-dealing, “then the burden shifts to the
fiduciaries ([here, the Respondent]) to demonstrate that the dealings were entirely
fair.”156
The Respondent admitted that he traded in the IBKR Account for his own
personal benefit. And he claimed entitlement to the gain on the Trust’s assets
through the handwritten agreement and the Superior Court Action. Each was an
independent breach of his duty of loyalty.157 He continued his self-interested
conduct in this action and failed to demonstrate that his dealings were entirely fair;
153
Paradee v. Paradee, 2010 WL 3959604, at *10 (Del. Ch. Oct. 5, 2010) (citations and
quotation marks omitted).
154
Stegemeier v. Magness, 728 A.2d 557, 564 (Del. 1999) (emphasis in original, internal
quotation marks omitted).
155
Walls v. Peck, 1979 WL 26236, at *4 (Del. Ch. Oct. 24, 1979).
156
In re Happy Child World, Inc., 2020 WL 5793156, at *10.
157
I would be remiss if I did not mention that the Respondent’s continued claims under the
alleged agreement are also barred by res judicata because of the Superior Court judgment.
See, e.g., Cassidy v. Cassidy, 689 A.2d 1182 (Del. 1997) (discussing res judicata, the
procedural bar to relitigating claims that have already been decided). See Rende v. Rende,
S20C-12-013 MHC, D.I. 29.
32
as Judge Conner from the Superior Court recognized, the alleged margin agreement
lacked consideration and was entirely one-sided.
But the Respondent’s improper claims did not stop at the IBKR Account. The
Respondent also tries to assert ownership of the Shore Drive Property, which is an
asset of the Trust. Although the Parties should have more clearly delineated the
Respondent’s interest in, and responsibilities for, the Shore Drive Property, the
Respondent’s claim that he owns, bought, or is otherwise entitled to claim title to the
Shore Drive Property is frivolous and a breach of his duties to hold and retain assets
of the Trust for the Trust’s beneficiaries.158
The Petitioners also argue that the Respondent breached his duty of due care
by engaging in margin trading. Specifically, they argue his conduct fell below the
standard for a prudent investor. “[T]rustees are held to a prudent investor standard
in the management and investment of a trust’s assets or property. In managing trust
property, trustees must act with skill, care, diligence and prudence in light of the
158
See also JX T, p.12-13 (“no individual Trustee of any trust created hereunder shall have
the power to participate in any decision concerning the distribution, use or application of
income or principle for his or her own benefit unless the power is limited by an
ascertainable standard described in Section 2401 of the Code;”) “Code” is defined as “the
Internal Revenue Code of 1986, as amended.” Id. at p.15.
The Vehicle transaction is also concerning. As addressed below, I find the
transaction is unenforceable and question the propriety of the Respondent’s actions. But I
struggle to find his conduct amounts to a breach of his duties as trustee, because, as far as
I can tell, the Vehicle was outside the Trust. The Respondent as co-trustee had duties to the
beneficiary vis-a-vis the Trust. This was a separate, albeit concerning, transaction.
33
circumstances.”159 “In addition to correctly administering the trust, a trustee also
must ensure the integrity of the corpus.”160 But, a trustee “is not liable to a
beneficiary for following a specific investment strategy to the extent that the trustee
acted in reasonable reliance on the terms of the trust. And in reviewing the
administration of a trust, [I] must consider the trustor’s intent when the trust was
created.”161
Looking to the Decedent’s intent as trustor of the Trust, I find the Respondent
should not be held liable because his investment strategy is, arguably, permitted by
the terms of the Trust. In pertinent part, the Trust gives the Parties the power to:
purchase or otherwise acquire, and to retain, whether originally a part
of the trust estate or subsequently acquired, any and all stocks, bonds,
notes, or other securities, or any variety of real or personal property,
including stocks or interest in investment trusts, regulated investment
companies and common trust funds, as it may deem advisable, whether
or not such investments be of the character permissible by law for
investments by fiduciaries. Investments need not be diversified and
may be made or retained with a view to a possible increase in value[;]162
[t]o sell, convey, lease, pledge, transfer, exchange, convert or otherwise
dispose of, or grant options with respect to, any and all property, real or
personal, at any time forming a part of the trust estate, publicly or
privately, without an order of court, in such manner, at such time or
159
Law v. Law, 753 A.2d 443, 447 (Del. 2000) (citation omitted).
160
Id. at 447-8 (citation omitted).
161
Id. at 448 (citations omitted).
162
JX T, p.9.
34
times, for such purposes, for such prices and upon such terms, credits
and conditions as it may deem advisable[;]163
and
[t]o borrow money for any purpose connected with the protection,
preservation or improvement of the trust estate whenever in its
judgment advisable, and as security to pledge any real or personal
property forming a part of the trust estate upon such terms and
conditions as it may deem advisable.164
Of course, this authority is limited by the requirement that the Parties take all
actions and make all decisions jointly, not individually; the Respondent breached
that limitation and exceeded his authority by acting alone. But assuming the Parties
acted jointly to implement the Respondent’s investment plan, the Petitioners have
not demonstrated that margin trading was impermissible under the Trust or, more
likely than not, against the Decedent’s intent reflected therein. Finding the evidence
in equipoise, I find the Petitioners failed to prove the Respondent breached his duty
of care.
Having found the Respondent exceeded the scope of his authority and
breached his duty of loyalty, I turn to the appropriate remedy. The Petitioners argue
163
Id.164
JX T, p.10.
35
that the Respondent should be removed as co-trustee and assessed judgment in the
amount of $1,332,822.30.165
I turn first to removal and find the Respondent should be removed as co-
trustee. Removal is not warranted by “some mere negligent breach of duty, arising
largely from an honest mistake.”166 “But a court will usually remove a trustee if his
duties, as such, are in conflict with his individual or other interests.”167 Such is the
case here. The Respondent admitted to using assets of the Trust for his own benefit
and has shown that he is unable to put his personal interests aside for the benefit of
the Trust and its beneficiaries. I find he should, thus, be removed as co-trustee.168
But the Petitioners have failed to prove that judgment should be entered
against the Respondent. “It is, of course, fundamental that a fiduciary who breaches
his duty is liable for any loss suffered by the beneficiary of his trust. Moreover, given
the nature of the right, it is also well established that any profit made through the
165
The Petitioner contends this amount consists of $234,125.00 in 2019 federal tax liability,
$52,183.00 in 2019 Delaware state tax liability, $159,700.00 for the December 18, 2019
margin call, $824,744.82 for transactions in 2020 related to margin calls, $1,264.09 for
November 2019 margin interest, $5,597.01 for December 2019 margin interest, $39,929.97
for January through December 2020 margin interest, $7,609.43 for November 2019 margin
commissions, $7,498.81 for December 2019 margin interest, and $170.46 for 2020 margin
interest. D.I. 92.
166
In re Catell’s Est., 38 A.2d 466, 469–70 (Del. Ch. 1944) (citations omitted).
167
Id.168
Under the Trust, if any of the co-trustees is removed, “the remaining of them shall serve
as Trustee.” JX T, p.17.
36
breach of trust may be disgorged through the device of constructive trust.”169 But
the Petitioners, as the moving parties, needed to present a non-speculative basis on
which to quantify damages. They failed to do so.
I find Stone v. Stant, 2010 WL 2734144, at *16 (Del. Ch. July 2, 2010) most
helpful. There, Vice Chancellor Noble found that a fiduciary breached the prudent
investor standard but held any award of damages would be arbitrary. Although the
moving parties demonstrated that the fiduciary engaged in risky day trading, which
resulted in a loss, the moving parties did not offer evidence “that would inform the
Court of what the prudent investment of funds during the time in question would
have generated.”170 Thus there was no measuring stick to ensure an award of
damages for losses would be anything but arbitrary.171
The same is true here. The Petitioners seek to hold the Respondent liable for
taxes, interest, and commissions related to the Respondent’s margin trading. But
they admit that, while the Respondent had control of the IBKR Account, it increased
in value and there was, ultimately, a net benefit.172 The Petitioners have failed to
present any evidence that the securities would have yielded a better return had the
169
Thorpe v. CERBCO, Inc., 1993 WL 443406, at *12 (Del. Ch. Oct. 29, 1993) (citations
omitted).
170
Stone v. Stant, 2010 WL 2734144, at *16.
171
Id.172
See Tr. 107:13-22.
37
Respondent not acted as he did, and by how much.173 Thus, I find the only available
remedy for the Respondent’s breach of his duties is his removal as co-trustee.
2. The Respondent failed to prove that either of the Petitioners
breached their duties as co-trustees, but accountings should,
nonetheless, be produced.
Generally, the Respondent argues that the Petitioners breached their duty of
disclosure by refusing to provide information to the Respondent as co-trustee and
engaged in self-dealing regarding the Fidelity IRAs. The Respondent alleges six
separate breaches of duty arising from (1) Ms. Lombard’s actions from March 2019
until the Final Plan, (2) Ms. Lombard’s failure to return property per the Family
Court settlement agreement, (3) the Petitioners “abruptly” taking control of the
IBKR Account, leading to a loss, (4) the Petitioners refusing to provide the
Respondent with information about the Trust and the Estate, (5) the Petitioners
refusing to provide information in this action, and (6) Ms. Lombard changing the
beneficiaries of the Fidelity IRAs. I find the Respondent failed to prove the
Petitioners breached their fiduciary duties.174
173
Further, I struggle to appreciate why the Respondent should be held liable for the losses
related to the margin calls, which occurred after the Parties agreed the Respondent should
not be margining the IBKR Account. At that time, the Petitioners took over management
of the IBKR Account and they have failed to prove by a preponderance of the evidence
that the losses after December 2019 were caused by or directly attributable to the
Respondent.
174
The Respondent challenges this finding in his exceptions, arguing that “[a]fter the
Decedent’s death . . . the Petitioners raided the Investment Accounting and withdrew their
share of the Investment Account while asking Fidelity to freeze Respondent’s share. None
38
Initially, the Respondent’s arguments regarding Ms. Lombard’s conduct
before the Final Plan, when she served as power of attorney, are no longer viable
because the Decedent has passed; that resolves items (1) and (6).175 Second, I find
of this was disclosed to Respondent but clearly implicates not only the duty of disclosure
but also the duty of loyalty through self-dealing.” D.I. 101. Upon review and further
consideration, I continue to find the Respondent failed to prove the Petitioners breached
their fiduciary duties by a preponderance of the evidence.
175
See Rambo, 2022 WL 4180890, at *6. The Respondent challenges this holding on
exceptions, arguing that the Respondent has standing to challenge the pre-death
transactions under Hill v. Myers, 2020 WL 3171372 (Del. Ch. June 15, 2020), Schock v.
Nash, 732 A.2d 217 (Del. 1999), and Stegemeier v. Magness, 728 A.2d 557 (Del. 1999).
Hill is a final report I issued on a motion to dismiss, wherein I found that certain
intestate heirs plead a reasonably conceivable claim that an attorney-in-fact breached her
fiduciary duties to the decedent by selling real property prior to the decedent’s death. The
real property was bequeathed to the moving heirs and the operative pleading alleged the
property was sold at a loss and to frustrate the heirs’ inheritance.
In Schock, the Delaware Supreme Court addressed a challenge by an estate trustee
and beneficiary to transfers made by an attorney-in-fact prior to the decedent’s death. The
court identified “current Delaware law,” as rendering attorney-in-fact transactions which
violate the fiduciary duty of loyalty “voidable at the behest of the beneficiary.” Schock v.
Nash, 732 A.2d at 225–26. The Respondent attempts to read this language broadly to
support that all beneficiaries of a deceased principal’s estate may challenge pre-death
actions by an attorney-in-fact. But context dispels any such notion. In Schock, the court
explained “[t]he common law fiduciary relationship created by a durable power of attorney
is like the relationship created by a trust. The fiduciary duty principles of trust law must,
therefore, be applied to the relationship between a principal and her attorney-in-fact.” Id.Thus, in the power-of-attorney context, the “beneficiary” of the fiduciary relationship is
the principal of the power, not the ultimate beneficiaries of the principal’s estate. The
Schock court expressly recognized as such, explaining in the matter before it, “the settlor
and beneficiary are the same.” Id. at 229. Because the challenge before Schock was brought
by the principal’s estate, standing was not an issue.
Finally, the Respondent points to Stegemeier. But Stegemeier was a trust case,
where beneficiaries of the trust challenged actions taken by the trustee; here I am
addressing post-death challenges by estate beneficiaries to actions taken by an agent, or
attorney-in-fact, to the deceased principal.
39
this Court should not convert alleged noncompliance with the Family Court
settlement agreement into a breach of fiduciary duty. If anything, the Respondent
may have claims within the Family Court’s jurisdiction or for breach of contract;
none of which are ripe for my consideration. Third, the evidence does not support
that the Petitioners “abruptly” took control of the IBKR Account; rather, the Parties
testified consistently that there was an agreement regarding how the IBKR Account
would be held and managed after December 18, 2019.176
The Respondent’s strongest argument relates to the duty of disclosure (items
(4) – (5)). Again, trustees owe “a duty to furnish information to a beneficiary upon
reasonable request.”177
I find the pleading stage ruling in Hill unpersuasive. Rather, I follow the logic of
Schock, coupled with 12 Del. C. § 49A-116, as interpreted in Rambo, 2022 WL 4180890,
at *6 and bolstered by 10 Del. C. § 3701. In the power-of-attorney context, the principal
is the only “beneficiary” of the fiduciary relationship created thereby. Claims the principal
may have for breach of fiduciary duty survive to the fiduciary of the principal’s estate, not
the beneficiaries of the principal’s estate. Because I have not changed this finding on
exceptions, the Respondent’s additional exceptions in Section I(A)-(C) of the opening brief
on exceptions are not addressed as moot. D.I. 101.
Because I find these claims are not viable neither are the requests for relief in the
form of accountings of the WSFS Account and the mortgage payments received by Ms.
Lombard. Those were not assets of the Trust; the former was purportedly management by
Ms. Lombard as attorney-in-fact and the latter are assets of the Estate.
The Respondent also appears to request an accounting regarding Ms. Lombard’s
management of the Ameritrade Account. But she managed such in her capacity as attorney-
in-fact and, for the foregoing reasons, the Respondent does not have a viable claim for an
accounting thereof.
176
Tr. 199:16-200:8.
177
Tigani, 2021 WL 1197576, at *15 (citations and quotation marks omitted).
40
Beneficiaries are entitled to information including the existence of the
trust, their status as beneficiaries . . . any significant change in their
beneficiary status; and . . . material information needed to protect their
interests. The scope of a beneficiary’s rights under a trust dictates what
constitutes information needed to protect their interests, such that [t]he
terms of a trust may alter the amount of information a trustee must give
. . . and persons to whom[ ] it must be given.178
The Respondent argues that the Petitioners breached this duty by refusing to provide
the Respondent with information both before and after the Decedent’s death.
Before the Decedent’s death, the Respondent’s concerns appear to be limited
to the IBKR Account after December 18, 2019, because he “had zero access. [He]
knew nothing about what was going on. [He] asked 50 times what’s happening. [He]
was given the cold shoulder saying ‘Tough we don’t have to tell you.’” 179 But the
Respondent has failed to introduce documentary evidence showing he requested
such access, and his request was denied.180 Without such support, I find the
Respondent’s testimony lacks credibility and is insufficient to meet his burden of
demonstrating, by a preponderance of the evidence, that the Petitioners breached
their duty of disclosure before the Decedent’s death.
178
Id. (alterations in original, citations and quotation marks omitted).
179
Tr. 199:3-8.
180
Cf. JX S, FF-LL, PP-QQ, VV. The closest the Respondent comes to asking for
information is an email from September 7, 2020, where he writes: “I hated to blow this
whole thing up, however, ive [sic] asked to see whats [sic] going on with [the Decedent’s]
affairs bank accounts etc. [the Petitioners] refuse.” JX LL, p.2.
41
After the Decedent’s death, the Respondent argues that he made requests for
information in this litigation. Specifically, the Respondent points to the Petitioners’
response to his counter-motion to compel where the Petitioners admit that they
“withheld their document production.”181 They did so because they “were concerned
that [the] Respondent may utilize the documents to access accounts to which he was
not authorized to access and, for that reason, sought a Confidentiality Order from
this Court.”182 Although this dispute was resolved, the Respondent argues the
Petitioners continued to withhold information about the IBKR Account.183 But the
Respondent had the ability to independently access, request, or collect this
information as co-trustee. The Respondent does not appear to have made any
attempts to do so, and I find his lack of effort undermines his claim for breach of
duty, which is otherwise unavailing.
But, even absent a breach, the Petitioners “have a duty to account to
beneficiaries for their disposition of trust assets and bear the burden of proving that
a disposition was proper.”184 Under this general principle, the Petitioners should be
181
D.I. 35, ¶8.
182
Id.183
Specifically, the Respondent points to JX HHH, which is a December 2019 statement
from the IBKR Account, which reflects it was generated on December 27, 2020, but was
not identified as an exhibit until the day before trial. D.I. 91, p.13.
184
Hardy v. Hardy, 2014 WL 3736331, at *12 (Del. Ch. July 29, 2014) (internal quotations
and alterations omitted).
42
required to account for the IBKR Account for the period of December 18, 2019
through the date it was closed. The Petitioners should also be required to account
for the Fidelity Account from the date it was funded from the IBKR Account to the
date of the Decedent’s death.
B. The Respondent’s property claims should fail.
The Respondent argues that he is entitled to certain assets currently reflected
as assets of the Estate or non-probate assets, which passed to the Petitioners. He also
argues that Ms. Lombard retained certain assets that should be transferred to the
Estate. I address these in turn.
The Respondent claims ownership of the Shore Drive Property (or a
corresponding interest in the Fidelity IRAs) and the Vehicle. Both items of
property, he contends, were gifted or promised to him by the Decedent, and he seeks
specific performance of those gifts or promises. To the extent the Shore Drive
Property is not transferred to him, the Respondent claims an interest in the Fidelity
IRAs, arguing that he was only removed as beneficiary because he was given the
Shore Drive Property. The Respondent’s ultimate claim is one for specific
performance of the alleged agreements or promises. “To grant specific performance,
43
there must be proof of a valid contract . . . and proof that plaintiff was ready, willing
and able to perform his contractual obligations.”185
The Respondent has produced no documentation supporting his claim that the
Shore Drive Property was sold to or otherwise gifted to him during the Decedent’s
life.186 The Shore Drive Property was purchased with assets of the Trust and titled
in the name of the Trust. I find by a preponderance of the evidence that the Shore
Drive Property was always intended to be an asset of the Trust.187
185
Morabito v. Harris, 2002 WL 550117, at *2 (Del. Ch. Mar. 26, 2002).
186
Cf. Frye v. Raphaelson, 2021 WL 4073425, at *2 (Del. Ch. May 3, 2021), adopted,
(Del. Ch. 2021) (“in the real property context, plaintiffs must set forth a reasonably
conceivable claim that the agreement was in writing or that an exception to the statute of
frauds applies”). The Respondent challenges this finding on exceptions, arguing that the
parties reached an agreement through email on April 29, 2020 that the Shore Drive Property
would be purchased for the Respondent, satisfying the statute of frauds. D.I. 101 (citing JX
KK). “A contract must contain all material terms in order to be enforceable, and specific
performance will only be granted when an agreement is clear and definite and a court does
not need to supply essential contract terms.” Osborn ex rel. Osborn v. Kemp, 991 A.2d
1153, 1159 (Del. 2010) (alterations and internal quotation marks removed) (quoting
Ramone v. Lang, 2006 WL 905347, at *10 (Del. Ch. Apr. 3, 2006)). The email chain in
JX KK fails this test.
187
Not only was this the most persuasive story from the conflicting testimony at trial but,
had the Parties acted to convert assets of the Trust for the Respondent’s sole benefit, such
would likely be a breach of their fiduciary duties. See Merrill Lynch Tr. Co., FSB v.
Campbell, 2009 WL 2913893, at *7-8 (Del. Ch. Sept. 2, 2009) (discussing a trustee’s duty
of impartiality to multiple beneficiaries). At best, it appears the Parties intended to provide
the Respondent with a life estate or other limited interest in the Shore Drive Property. But
the Respondent took an all-or-nothing approach and, despite the opportunity to do so, did
not advocate in post-trial briefing for any interest short of full ownership. In my draft
report, I declined to act sua sponte.
Through his exceptions, the Respondent takes issue with this holding and the
version of this footnote in my draft report. Specifically, the Respondent argues that my
refusal to act sua sponte to address a property interest short of full ownership leaves an
44
I further find that the Respondent has failed to establish an interest in the
Fidelity IRAs. The Fidelity IRAs passed outside the estate to the named
beneficiaries. The Respondent was removed as a beneficiary by Ms. Lombard; she
contends it was done at the Decedent’s request and the Respondent contends it was,
instead, a self-dealing transfer.
The Respondent cites Coleman v. Newborn, 948 A.2d 422, 429 (Del. Ch.
2007), which quotes from Faraone v. Kenyon, 2004 WL 550745, at *11 (Del. Ch.
Mar. 15, 2004): “A self-dealing transfer of the principal’s property to the attorney-
in-fact is voidable in equity unless the attorney-in-fact can show that the principal
issue undecided and destined for future conflicts. Although I agree future disputes appear
likely, the Respondent’s attempt to shift the blame is not well taken. In post-trial briefing,
the Respondent requested “[a]n Order from the Court granting full and complete title of”
the Shore Drive Property to the Respondent. D.I. 91. The Respondent made no argument
regarding a life estate or other interest short of full ownership. Rather, the argument
appears for the first time in the exceptions, which is impermissible. Thor Merritt Square,
LLC v. Bayview Malls LLC, 2010 WL 972776, at *5 (Del. Ch. Mar. 5, 2010) (“The failure
to raise a legal issue in an opening brief generally constitutes a waiver of the ability to raise
that issue in connection with a matter under submission to the court.”); see also Walsh v.
William T. Spooner Post 17, Inc., 2013 WL 5569192, at *1 (Del. Ch. Oct. 9, 2013) (finding
an argument waived when reserved for exceptions). The Respondent likewise argues for
the first time on exceptions that, if specific performance is denied, the Court should order
alternative relief to balance the equities; any such argument and request for relief should
have been made in post-trial briefing and has been waived. Id.I also find I cannot address the Petitioners’ request for judgment against the
Respondent for fees and expenses related to the Shore Drive Property; despite the
opportunity to do so, the Petitioners did not present sufficient evidence at trial to support
such an award. See D.I. 91, p.29. The only evidence adduced at trial was the testimony of
Ms. Lombard that the Respondent failed to pay certain expenses. Tr. 67:19-68:5. Nothing
has been presented to show what was or was not paid, when. Thus, any award of damages
would be speculative.
45
voluntarily consented to the interested transaction after full disclosure.” In Coleman,
Vice Chancellor Lamb relied on that quote in granting a principal’s request to set
aside a property transfer to her former agent.188 In Faraone, Justice Jacobs, sitting
by designation, addressed a challenge brought by the deceased principal’s executor
against her former agent.189
But the Respondent does not stand in the same position as the moving parties
in Coleman and Faraone; he is not the principal nor is he serving as executor of the
Estate. Nor can he invoke standing under the Trust, as co-trustee, because the
Fidelity IRAs are not assets of the Trust. Rather, I find the Respondent only had
standing to challenge Ms. Lombard’s conduct regarding the Fidelity IRAs during the
Decedent’s lifetime.190 Thus, his claim should fail. I find the Respondent is not
entitled to any portion of the Fidelity IRAs to which he was not designated as a
beneficiary on the date of the Decedent’s death.191
188
Coleman v. Newborn, 948 A.2d 422, 429-30 (Del. Ch. 2007).
189
See generally Faraone v. Kenyon, 2004 WL 550745, at *11 (Del. Ch. Mar. 15, 2004).
190
In re Burke Est., 2016 WL 4217752, at *5 (Del. Ch. Aug. 10, 2016) (“With one
exception, the above statute contemplates petitions for judicial relief from interested
persons while the principal is alive. The exception is for cases where the personal
representative, trustee or beneficiary of the principal’s estate might seek appropriate relief,
i.e., an accounting, under Section 49A-114(g).”).
191
I further find the Respondent’s argument should fail on its merits. The Respondent
contends the Decedent wanted her entire estate, probate or non-probate, to pass equally to
her three children. Per the Respondent, the beneficiary designations for the Fidelity IRAs
violated that general principle. But the Respondent does not appear to dispute the IRA
conversion account with TD Ameritrade, which named the Respondent and Ms. Rende as
50/50 beneficiaries. D.I. 78, p.13. Further I find the Respondent’s testimony that the
46
I further find the Vehicle is an asset of the Estate. The Respondent produced
a handwritten receipt for the purchase of the Vehicle, but title to the Vehicle was
never transferred and the Vehicle has been outside the Respondent’s custody or
control since March 30, 2020, when it was collected by the police. Further, the
circumstances surrounding the handwritten receipt are concerning and reflect poorly
on the Respondent.192 As such, he has failed to meet his burden to prove ownership
of the Vehicle. The Vehicle should be provided to the Estate by whomever has
current possession and control.
Finally, the Respondent argues that Ms. Lombard should be required to return
certain real property to the Estate, including jewelry and a tea set. But this dispute
was already litigated before the Family Court and the parties settled their dispute.
To the extent the Respondent seeks to relitigate this issue, he is barred by res
judicata.193 To the extent he contends the settlement agreement was breached, the
Decedent approved of the Superior Court Action was not credible; I find it much more
likely that she was displeased and acted in response to remove the Respondent as a
beneficiary of the Fidelity IRAs. On the record before me, I find by a preponderance of
the evidence that the Decedent directed Ms. Lombard to change the beneficiary
designations for the Fidelity IRAs as a response to the Superior Court Action.
192
By the Respondent’s own admission, the Decedent may have lacked capacity to so
contract (or otherwise been of weakened intellect) and the Vehicle was worth substantially
more than $1.00. Tr. 253:6-24. See JX PP, p.2; JX X, p.1.
193
See Dover Hist. Soc’y, Inc. v. City of Dover Plan. Comm’n, 902 A.2d 1084, 1092 (Del.
2006) (“Res judicata operates to bar a claim where the following five-part test is satisfied:
(1) the original court had jurisdiction over the subject matter and the parties; (2) the parties
to the original action were the same as those parties, or in privity, in the case at bar; (3) the
original cause of action or the issues decided was the same as the case at bar; (4) the issues
47
Respondent has failed to plead and prosecute a breach-of-contract claim. Thus, his
request for relief relating to this personal property should be denied.
C. The loose ends should be wrapped up.
The remaining loose ends relate to (1) the funds locked or frozen in the
Fidelity Account, which have not been released to the Respondent, (2) loans the
Decedent made to the Respondent, (3) the Milton Property, and (4) the Estate’s
administration.194 I find (1) the Fidelity Account should be disbursed to the
Respondent, in part, with (2) $14,729.00 directed instead to the Decedent’s estate
for repayment of the loans, (3) that the Petitioners, as the remaining co-trustees,
should exercise the Decedent’s option regarding the Milton Property, and (4) that
the Estate should be administered by the current neutral fiduciary.
The Petitioners have failed to prove non-speculative damages arising from the
Respondent’s breach of his fiduciary duties. I see no reason to continue holding the
Respondent’s portion of the Fidelity Account, unless the banking institution has an
independent basis to do so, which would be outside this Court’s jurisdiction. But I
find the loans the Decedent made to the Respondent, which have not been repaid,
in the prior action must have been decided adversely to the appellants in the case at bar;
and (5) the decree in the prior action was a final decree.”).
194
Both sides also request that I shift fees and costs in their favor but neither has briefed
the issue fully. I am inclined to defer any consideration of fee and cost shifting until the
conclusion of this proceeding, which will not occur until after the accountings are
submitted and any related disputes are resolved. I invite the Parties to discuss an
appropriate schedule for these final stages.
48
should be deducted from the Respondent’s recovery and directed, instead, to the
Estate.
The Respondent does not dispute that the Decedent loaned him, and he failed
to repay, $14,729.00.195 But he argues that the loans were forgiven because the
Decedent told him “not to bother” paying her back because the money would be his
anyway.196 Even if I accept this convenient testimony, I disagree that this was an
enforceable forgiveness. At most it reflects (1) the Decedent deferring payment until
after her death, because the loans could be repaid from the Respondent’s share of
the Estate or (2) the Decedent’s mistaken belief that the Estate could not collect on
debts owed to her. Neither supports a finding that the loans were forgiven before
the Decedent’s death and the loans did not extinguish or become unenforceable
thereafter.197 The loans should be paid directly to the Estate from the Respondent’s
share of the Fidelity Account.
195
Tr. 271:9-20.
196
Tr. 271:19-24.
197
See 10 Del. C. § 3701 (“All causes of action, except actions for defamation, malicious
prosecution, or upon penal statutes, shall survive to . . . the executors or administrators of
the person to, or against whom, the cause of action accrued. Accordingly, all actions, so
surviving, may be instituted or prosecuted by . . . the executors or administrators of the
person to . . . whom the cause of action accrued”); 12 Del. C. § 1905 (providing in relevant
part that an estate’s inventory is to include, inter alia, “a list of all debts and credits due or
belonging to the decedent or to the decedent’s estate”).
49
Once the Respondent is removed as co-trustee, the Petitioners, as the
remaining co-trustees, should exercise the Decedent’s option to purchase the Milton
Property. The co-trustees should then act jointly to administer the Trust under its
terms. The Respondent’s request to terminate the Trust and issue an order for
distribution thereof should be denied without prejudice to renew after the
accountings contemplated herein are completed and to the extent the Parties dispute
ultimate distribution.
Finally, I turn to the Estate. The Petitioners ask that they be appointed co-
executrixes of the Estate.198 But I am not inclined to remove the current disinterested
representative in favor of any of the Parties. Initially, I would not do so without
providing notice to such representative and the opportunity to be heard. But,
moreover, I see great benefit to a neutral representative administering the Estate,
considering the contentious relationship between the Parties. I appreciate, however,
that the representative may have agreed to serve only for a limited time and may be
unwilling to continue; if so, this recommendation is no bar to consideration of a
petition from the representative seeking permission to resign.
198
D.I. 92, p.31.
50
D. The renewed motion for interim relief should be denied.
In Respondent’s renewed motion he argues that he has prevailed on his claim
to his share of the Fidelity Account, thus, the funds should be released without delay.
The Respondent argues his “continued life as a pauper in a state of poverty creates
irreparable harm.”199 The Petitioners counter that the request is barred by the law of
the case doctrine and the Respondent fails to demonstrate irreparable harm. The
Petitioners further argue that the relief sought by the Respondent cannot be granted
because Fidelity is in indispensable party to any request for release of the funds and
has not been joined.
In my draft report, I found the Fidelity Account should be disbursed to the
Respondent, in part, with $14,729.00 directed instead to the Decedent’s estate for
repayment of the loans. I explained then, as I do again here, “I see no reason to
continue holding the Respondent’s portion of the Fidelity Account, unless the
banking institution has an independent basis to do so, which would be outside this
Court’s jurisdiction.”200 Neither side took exceptions to that finding and, because it
is unchanged in this final report, further exceptions are barred under Court of
199
D.I. 98.
200
The Respondent argues “Fidelity has no interest in the funds except to comply with
whatever the Court determines.” D.I. 100. But the bank froze the remaining funds on its
own initiative, albeit prompted by knowledge of this action. The Court is not privy to the
bank’s internal processes, nor has the bank had formal notice of the request for release and
the opportunity to respond and state any objections in this action. On this record, I am
hesitant to issue an order directing Fidelity, a third party, to act.
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Chancery Rule 144. With an uncontestable ruling that the Fidelity Account should
be disbursed, I expect this matter will resolve itself. But I find interim injunctive
relief is unwarranted and the renewed motion should be denied.201
III. CONCLUSION
For the foregoing reasons, I find the Respondent breached his fiduciary duties
and should be removed as co-trustee; the Petitioners should continue as co-trustees
in his absence. In that role, the Petitioners should exercise the option regarding the
Milton Property and otherwise administer and distribute the Trust according to its
terms. The Petitioners should, however, account for the IBKR Account and Fidelity
Account from December 18, 2019 through the date of the Decedent’s death. Any
cloud on title to the Shore Drive Property and the Vehicle should be resolved in favor
of the Trust and the Estate, respectively. The Respondent should be provided his
share of the Fidelity Account, less the unpaid loans, which should be paid directly
to the Estate, unless Fidelity has an independent reason to refuse distribution. And
the Estate should be administrated by the appointed neutral representative until
further order of this Court.
201
The “sine qua non of preliminary injunctive relief” is “the threat that irreparable harm
will befall [the moving party] between” the time of the request and a final order “unless an
injunction issues.” Kingsbridge Cap. Gp. v. Dunkin’ Donuts Inc., 1989 WL 89449, at *4
(Del. Ch. Aug. 7, 1989). Through this final report, a final ruling is issued regarding the
Fidelity Account, which negates any good faith basis the Petitioners may have had to
request that the freeze continue and should be sufficient to compel the institution to release
such funds in the manner prescribed herein.
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This is my final report and exceptions may be filed under Court of Chancery
Rule 144.
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