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In re Estate of DeGroat

Court of Chancery of Delaware

October 2, 2017


          Date Submitted: September 18, 2017

          David J. Ferry, Esquire and Brian J. Ferry, Esquire, of FERRY JOSEPH, P.A., Wilmington, Delaware; Attorneys for Plaintiff.

          Jason C. Powell, Esquire, of THE POWELL FIRM, LLC, Wilmington, Delaware; Attorney for Defendant.



         In this estate matter, a child of the decedent's first marriage questions the extent to which the decedent intended to benefit the decedent's second ex-wife. The petitioner alleges that in the decedent's final years, the second ex-wife utilized a power of attorney to name herself beneficiary of several of the decedent's accounts, influenced the decedent to execute a deed to convert co-ownership of real property with the decedent from tenants in common to joint tenants with the right of survivorship, and sold the property and retained all the proceeds while the decedent was still alive.

         Pending in this case are the plaintiff's July 3, 2017, motion to compel; the plaintiff's July 5, 2017, motion to amend the complaint; the defendant's August 2, 2017, motion to dismiss; and the plaintiff's August 15, 2017, motion to strike portions of the defendant's deposition errata sheet. Each motion has been fully briefed. This is my final report pursuant to Court of Chancery Rule 144. I recommend the Court grant the motion to amend in part and deny it in part, grant the motion to compel, and deny the motion to strike. I view the motion to dismiss as a motion for summary judgment and defer decision until all parties have presented material pertinent to a dispositive motion.

I. Background[1]

         Richard L. DeGroat ("Decedent") and Jan DeGroat married in or around 1954 and had five children: Plaintiff R. Michael DeGroat ("Michael"), Thomas S. DeGroat, Carroll L. Iacovetti, Brian C. DeGroat, and Andrew J. DeGroat. Jan[2] and Decedent divorced, and Decedent married Defendant Lucinda Papa in 1977. Decedent and Lucinda divorced in 2008. Lucinda is currently married to Michael Ziatyk ("Ziatyk").

         In 2001, seven years before Lucinda and Decedent divorced, Lucinda and Decedent purchased a home at 3 Somerset Lane, Newark, DE 19711 ("the Property") for $350, 000.00, which they owned as tenants by the entirety. Lucinda and Decedent's 2008 divorce converted that ownership into tenancy in common. They divorced without any written divorce decree or agreement addressing their property.

         On January 11, 2012, Decedent executed a will that gave a specific gift of personal property to Decedent's granddaughter, and divided the remaining estate among Decedent's five children. The will states:

I direct the executor to sell my real estate for such price and upon such terms and credits as my Executor deems proper. I further authorize and direct the Executor to institute any partition action necessary to sever any interests I have with my ex-wife Lucinda P. DeGroat.[3]

         The will names Michael as Decedent's executor.

         Michael alleges that Lucinda learned about this will and induced Decedent to execute a power of attorney naming Lucinda as agent on December 2, 2013. Michael alleges Lucinda improperly used this power of attorney to designate herself as beneficiary of several of Decedent's investment accounts and life insurance policies. Michael contends Decedent intended for those assets to pass to his children, grandchild, and first wife Jan. Michael also alleges that Lucinda moved Decedent out of the Property to an assisted living facility and renovated the Property using Decedent's funds, without his consent or authorization. On October 1, 2014, the Property sold for $445, 640.00. Michael alleges Lucinda kept all of the $402, 361.72 in proceeds from the sale.

         Lucinda contends that when she and Decedent divorced, they agreed that Lucinda should receive many of Decedent's assets, including investment accounts and life insurance policies, and that Lucinda (who was substantially younger than Decedent) would assist Decedent as he aged. Lucinda also contends that she and Decedent agreed she should renovate the Property and keep the proceeds from its sale.

         Decedent passed away, unmarried, on June 14, 2016. Under the terms of Decedent's will, Michael was appointed executor of Decedent's estate. Michael approached Lucinda regarding Decedent's assets, and Lucinda provided an extensive response stating she and Decedent had agreed Decedent would give Lucinda his retirement accounts and funds from the sale of the house, and Lucinda would care for Decedent as needed.[4] Lucinda's response did not satisfy Michael, and Michael filed a complaint on September 9, 2016.

         Count I of Michael's complaint asserts Lucinda breached her fiduciary duties as Decedent's agent and asks the Court to invalidate Lucinda's transfers or retitling of assets. Count II seeks an accounting of Lucinda's actions under the power of attorney. Count III seeks a constructive trust over assets Lucinda allegedly improperly obtained, and Count IV seeks return of those assets under a theory of unjust enrichment. Michael initiated this action in his personal capacity and as executor of Decedent's estate. On November 11, 2016, Lucinda answered and counterclaimed for the costs she expended in assisting Decedent. Michael answered the counterclaim on November 18, 2016. The parties engaged in discovery.

         Beginning in July 2017, the parties filed and briefed the pending motion to compel, motion to amend the complaint, motion to dismiss, and motion to strike. This is my final report.

         II. Analysis

         a. I recommend the Court grant Plaintiff's motion to amend the allegations and to add Ziatyk as a defendant, but deny it as to adding Jan and Carroll as plaintiffs.

         With the benefit of discovery, Michael seeks to amend his complaint to specify bank accounts and transactions underlying Lucinda's alleged wrongful acts; to add Jan and Carroll as plaintiffs because they were beneficiaries of certain of Decedent's accounts and policies before Lucinda named herself as beneficiary; and to add Ziatyk as a defendant because he allegedly benefitted from Lucinda's misappropriation of Decedent's funds.

         The requested amendment also alters Michael's allegations regarding the retitling of the Property. The redline comparing Michael's proposed amended complaint to the original complaint highlights this change:

5. In spite of the fact that they had been divorced for many years and that Mr. DeGroat specifically excluded Lucinda from any inheritance, upon information and belief, Lucinda influenced Mr. DeGroat into executing a new deed to his home on January 29, 2013 and also executing a Power of Attorney naming Lucinda as Agent on December 2, 2013. … .
11. Mr. DeGroat refused to voluntarily retitle or transfer any of his assets to Lucinda. He did not voluntarily allow her to change his accounts and policies to name herself as the primary beneficiary. He did allow her to retitle the ownership of the Property as a joint tenancy, but He did not allow her to take 100% of the proceeds when the home the Property at 3 Somerset Lane was sold.[5]

         In opposing Michael's motion to amend, Lucinda contends Michael's attempt to add Jan and Carroll as plaintiffs is designed to rescue his case from dismissal due to lack of standing, under the theory that none of the disputed assets ever belonged to Michael or the estate. Lucinda asserts neither Jan nor Carroll has any knowledge of the allegations in the proposed amended complaint. Lucinda also claims the proposed amendments are futile, on two grounds: the amendments do not repair Michael's lack of standing, and the allegations of undue influence are insufficient to state a claim and are disproven by the evidence. Lucinda also argues the proposed amendments are prejudicial because they withdraw Michael's concession in the original complaint that Decedent allowed Lucinda to retitle the Property as a joint tenancy. Finally, Lucinda claims the proposed amendments are untimely. Lucinda does not explicitly oppose adding Ziatyk as a defendant.

         Court of Chancery Rule 15(a) provides that leave to amend a pleading shall be freely given when justice so requires.

This determination is a matter of the court's discretion. Rule 15(a) reflects the modern philosophy that cases are to be tried on their merits, not on the pleadings. Therefore, courts generally will not test the sufficiency of the pleadings in ruling on a motion to amend. A motion to amend may be denied, however, if the amendment would be futile, in the sense that the legal insufficiency of the amendment is obvious on its face. In exercising its discretion, the court also considers factors such as bad faith, undue delay, dilatory motive, repeated failures to cure by prior amendment, undue prejudice, and futility of amendment.[6]

         Rule 15 instructs me to evaluate pleadings on their face: a motion to amend is not the time to test pleadings against evidence that may have been collected during discovery. I therefore do not consider Lucinda's arguments that she can disprove the allegations of undue influence and incapacity, without prejudice to Lucinda's ability to renew these arguments in a dispositive motion or at trial.

         The question remains whether the proposed amended complaint is futile because of obvious legal insufficiency. The proposed amended complaint alleges that in 2013, Lucinda influenced Decedent into executing a new deed to the Property naming Lucinda and Decedent as joint tenants with right of survivorship, and also a power of attorney naming Lucinda as agent. It also alleges Lucinda moved Decedent out of the Property, sold it in 2014 by signing Decedent's name, and kept all of the ...

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