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IMO Restated Revocable Trust of Conlin

Court of Chancery of Delaware, New Castle

January 21, 2014

IMO The Restated Revocable Trust of Lawrence F. Conlin, Deceased

Draft Report: January 7, 2014

Submitted: October 10, 2013

Kristopher T. Starr, Esquire Lisa L. Coggins, Esquire Brian J. Ferry, Esquire Ferry Joseph & Pearce, P.A.

Edward M. McNally, Esquire Patricia A. Winston, Esquire Morris James LLP.

Dear Counsel:

A trust beneficiary, who began receiving monthly statements relating to the trust in January 2008, and who began asking questions and raising concerns in 2007 regarding the assets that comprise the trust, finally filed an action against the trustee in November 2012. The trustee moved for summary judgment on the basis that the beneficiary's claims are untimely. The beneficiary argues that, notwithstanding the monthly statements and her frequent questions regarding the trust, the statute of limitations did not begin to run until February 2012, when a forensic accountant retained by the beneficiary rendered a report regarding the administration of the trust. For the reasons that follow, I conclude the beneficiary's claims are time-barred, and recommend that the Court enter summary judgment in favor of the trustee on that basis. Because I find the claims are not timely, I do not reach the trustee's alternate argument that he is entitled to summary judgment on the merits of the claims. There are disputed issues of fact regarding the trustee's claim for attorneys' fees under 12 Del. C. § 3584, and I therefore recommend that the Court deny the trustee's motion for summary judgment on that issue.

FACTUAL BACKGROUND[1]

The Revocable Trust of Lawrence F. Conlin was created in 1993 and restated on December 18, 1996 (the "Trust") by Lawrence F. Conlin ("Lawrence"), [2] who was the trustor and the initial trustee of the Trust. In February 2004, Lawrence resigned as trustee and designated his son, Daniel Conlin ("Daniel"), as successor trustee. In April 2005, with Lawrence's physical and mental health declining, Daniel became Lawrence's court-appointed guardian. Lawrence died on August 19, 2007. He was survived by his second wife, Norma Conlin ("Norma"), and his five children.

The terms of the Trust provided that all the net income of the Trust would be paid to Norma for the remainder of her life.[3] The trustee also was permitted to invade the Trust principal if the funds available to Norma were insufficient to provide for her health, education, maintenance, and support.[4] After Norma's death, the remaining principal was to be divided into equal shares for each of Lawrence's children, which each such child serving as trustee of her or her own share of the Trust.[5] The petitioner, Mary P. Judge ("Ms. Judge"), is one of Lawrence's children.

At the time of Lawrence's death, the Trust's assets included the Lawrence F. Conlin Fidelity Revocable Trust Account (the "Fidelity Trust Account"), the Lawrence F. Conlin, Jr. Fidelity Rollover IRA Account (the "Fidelity IRA"), and the Janney Montgomery Scott Lawrence F. Conlin Trust Account (the "Janney Montgomery Account").[6] After Lawrence's death, Daniel, who is the respondent in this action, transferred those accounts to Wells Fargo. The Fidelity IRA was transferred to what the parties call the "Wells Fargo IRA, " and the Fidelity Trust Account and the Janney Montgomery Account were consolidated into a trust account the parties call the "Wells Fargo Trust Account."[7]

After Lawrence's death and before the accounts were transferred to Wells Fargo, Daniel provided quarterly reports to the beneficiaries. The Wells Fargo accounts were established by December 2007, and all of the Trust beneficiaries, including Ms. Judge, then began receiving monthly statements relating to the Trust. The monthly statements described the Trust assets and transactions relating to the Trust.[8]

Notably, in addition to receiving the monthly statements beginning in January 2008, Ms. Judge began raising as early as 2007 questions and concerns about the Trust and assets she believed should be contained in the Trust. In 2007, both Ms. Judge and her attorney contacted Exxon Mobil Corporation ("Exxon") regarding shares of Exxon stock Ms. Judge believed Lawrence owned.[9] During that same period, Ms. Judge also began asking questions regarding Mellon Bank accounts she believed were held by her father or her late mother, Eloise Conlin.[10] Similarly, Ms. Judge received one or more documents from Fidelity in 2007 or 2008 regarding a 529 account that she believes may have been established on behalf of herself or her issue.[11] Although she contends she never received satisfactory responses from Daniel regarding the assets at issue, she did not take any further steps at the time to pursue her concerns.

Norma died on May 29, 2010. In late 2011 or early 2012, Daniel announced that he intended to distribute the corpus of the Trust into five shares for each of Lawrence's children, and sought a waiver from the beneficiaries covering Daniel's administration of the Trust. That waiver request apparently spurred Ms. Judge to retain a forensic accountant to review information regarding the Trust. The accountant, William St. Clair, issued a series of reports that identified several issues regarding Daniel's administration of certain Trust assets. Mr. St. Clair apparently issued three reports, the second of which (the "Second St. Clair Report") was rendered sometime around May 2012. The Second St. Clair Report formed the basis for correspondence between the parties' counsel and later was used to prepare the petition filed by Ms. Judge in this action.[12] During discovery Ms. Judge revealed that Mr. St. Clair issued a third report (the "Third St. Clair Report") in or around August 2012.[13] Although the Third St. Clair Report was issued well before this action was filed, Ms. Judge apparently did not rely on it when preparing the petition.[14] The parties dispute the significance of the Third St. Clair Report: Daniel contends the report indicates Mr. St. Clair signed off on Daniel's administration of the trust and had no further questions or concerns, but Ms. Judge disagrees, asserting that the Third Report identifies several unresolved issues regarding the Trust.

After exchanging correspondence with Daniel's counsel regarding the Trust, Ms. Judge filed this action on November 21, 2012. The petition alleges Daniel breached his fiduciary duties as trustee and seeks removal of Daniel as trustee, an accounting of Daniel's actions as trustee, and damages for any transaction for which Daniel cannot properly account. According to the petition, Mr. St. Clair "found discrepancies and other issues with the handling and transferring of funds between various financial accounts which left several hundred thousand dollars in assets missing or otherwise unaccounted for from the Trust."[15] In addition, the petition identifies "a significant amount" of Exxon stock, one or more Mellon Bank accounts, and "several" 529 accounts that could not be traced.[16] The petition criticizes Daniel for ...


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