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In re Estate and Trust of Kalil

Court of Chancery of Delaware

February 7, 2018

IN THE MATTERS OF THE ESTATE AND TRUST OF JAMES KALIL, SR., deceased, and KALIL ASSOCIATES, a Delaware general partnership.
v.
JAMES P. KALIL, JANICE KETCHAM, LAURA BEDROSSIAN and JACQUELINE KALIL, Respondents. DONALD J. KALIL, executor of the Estate of James Kalil Sr., and trustee of the James Kalil, Sr. Revocable Trust, and on behalf of Kalil Associates, a Delaware general partnership, Petitioner,

          Date Submitted: October 29, 2017

          Draft Report: November 3, 2017

          David J. Ferry, Jr., Esquire and Rick S. Miller, Esquire, of FERRY JOSEPH, P.A., Wilmington, Delaware; Attorneys for Petitioner.

          James P. Kalil, pro se, Respondent.

          Neil Lapinski, Esquire, of GORDON, FOURNARIS & MAMMARELLA, P.A., Wilmington Delaware; Attorneys for Janice Ketcham.

          Thomas A. Uebler, Esquire, of COOCH & TAYLOR, P.A., Wilmington, Delaware; Attorneys for Jacqueline Kalil.

          Laura Bedrossian Gibson, pro se, Respondent.

          MASTER'S REPORT (MOTIONS FOR SUMMARY JUDGMENT)

          Morgan T. Zurn Master in Chancery.

         In this estate matter, the decedent had a comprehensive and oft-adjusted estate plan. However, the decedent did not title two primary assets, specifically an investment account and a property with an office building on it, in a manner that would permit their distribution according to the more recent features of his estate plan. One of the decedent's children, the executor of the decedent's estate, seeks to reform a trust so that the account is held in a more recently executed trust, and to dissolve a general partnership so that the property is held in a more recently created limited partnership. Another of the decedent's children objects and raises other claims regarding the estate.

         In this final report on cross-motions for summary judgment, I conclude that the decedent's titling of the investment account cannot be addressed by trust reformation. I also conclude a general partnership holding title to the property should be dissolved and the property conveyed to a limited partnership that all believed had held the property for over a decade. I conclude that the objector's claims with regard to the decedent's estate and testamentary documents are time-barred. I recommend the Court grant the petitioner's motion for summary judgment in part and deny it in part, and deny the objector's motion for summary judgment. Finally, I recommend the Court permit some, but not all, of the petitioner's attorneys' fees to be paid from the decedent's trusts.

         I. Background[1]

         A. The Parties and Entities

         Dr. James Kalil, Sr. ("Settlor") died testate on November 8, 2014. He was survived by his children, petitioner Donald J. Kalil ("Petitioner") and respondents James Kalil, Jr. ("Respondent"), Laura Bedrossian Gibson ("Laura") and Janice Ketcham ("Janice").[2] Settlor was also survived by Respondent's daughter Jacqueline Kalil ("Jacqueline"). Settlor's wife Claire Kalil ("Claire") predeceased him.

         Settlor created two revocable trusts: one in 1989, and one in 1997 ("the 1989 Trust" and "the 1997 Trust"). When Settlor died, the bulk of Settlor's liquid wealth was in an account titled in the name of the 1989 Trust. Petitioner is executor of Settlor's estate and trustee of Settlor's 1997 Trust, as amended.[3]Petitioner, Respondent, Janice, and Laura are co-trustees of the 1989 Trust.[4]

         The Kalil family owned and ran an investment firm, now known as Affinity Wealth Management, Inc. ("AWM"), and formerly known as Compu-Val Investments, Inc. ("Compu-Val"). The firm has its principal place of business at 1702 Lovering Avenue, Wilmington, Delaware 19806 ("the Property"). Settlor and Claire created Kalil Associates, a Delaware general partnership, to acquire, hold, and manage the Property. Kalil Associates acquired the property on February 1, 1985.[5] Settlor and Claire were the sole partners of Kalil Associates. The record title of the Property is still held by Kalil Associates.

         On May 10, 2000, Settlor and Claire formed Kalil Family Limited Partnership, a Delaware limited partnership ("Kalil LP").[6] Kalil LP was created to pass the Property's value to their children in a tax-efficient manner.[7] The Property was never transferred from Kalil Associates to Kalil LP.

         B. Settlor's Estate Plan

         On February 23, 1989, Settlor executed the 1989 Trust along with a pourover will.[8] The 1989 Trust divides its property evenly among Settlor's four children.[9] Settlor reserved the powers of amendment and revocation.[10] On February 23, 1993, Settlor executed a Supplemental Trust Agreement, which amended the 1989 Trust to give one third of the trust property to Janice, one third to Laura, one sixth to Respondent, and one sixth to Petitioner.[11] The 1989 Trust and 1993 Supplemental Trust Agreement state that the shares held by Petitioner and Respondent shall be funded with voting or equity interest in Compu-Val or its successor, and the other shares shall be funded with other assets.[12]

         Also in 1993, Settlor opened an investment account with Butcher & Singer ("the Account") and titled the Account in the name of the 1989 Trust. In 2001, Settlor moved the Account to TD Bank, and in 2008, he moved it to Charles Schwab. The Account remained titled in the name of the 1989 Trust, and remains so titled today.

         On July 15, 1997, Settlor executed the 1997 Trust.[13] Settlor also executed a new pourover will giving all the residue of his estate to the 1997 Trust.[14] The 1997 Trust originally distributed its property in the same proportion as the 1993 Supplemental Trust Agreement: one third to Janice, one third to Laura, one sixth to Respondent, and one sixth to Petitioner.[15] The 1997 Trust does not specify how those shares are to be funded. The 1997 Trust does not reference or explicitly revoke or amend the 1989 Trust.

         Settlor amended the 1997 Trust six times before he passed on November 8, 2014.[16] The 1997 Trust as ultimately amended distributes one-sixth of its property to Respondent, debited by $500, 000 for lifetime advancements, with the remainder held in trust for Respondent's lifetime. Respondent's distributions thereunder are limited to $120 per month while he is incarcerated, and thereafter to the interest on the trust principal for the balance of his life with the principal left in trust for Jacqueline. The 1997 Trust as amended distributes one third of its property to Janice, debited by $790, 000 for lifetime advancements as well as any additional sums advanced for her benefit as determined by the Trustee. Finally, the 1997 Trust as amended distributes one third of its property to Laura and one sixth to Petitioner. In sum, the 1997 Trust's distribution scheme is more beneficial to Jacqueline, Petitioner, and Laura, while the 1989 Trust's distribution scheme is more beneficial to Respondent and Janice.

         Pursuant to Settlor's 1997 will, Petitioner was appointed as personal representative of Settlor's estate on January 16, 2015. At the time of Settlor's death, the gross value of his property was approximately six million dollars. Settlor's largest assets are the Account, with an approximate date of death value of $4.3 million; a promissory note from Petitioner with an approximate balance of $1.4 million; and another promissory note from Kalil LP with an approximate balance of $36, 331.00.

         C. Procedural History

         On May 20, 2015, Petitioner, as executor of Settlor's estate and as trustee of the 1997 Trust, filed a petition naming his siblings and Jacqueline as respondents. Petitioner seeks to reform the 1997 Trust to replace, amend, or revoke the 1989 Trust, so that the Account titled under the 1989 Trust can be distributed according to the terms of the 1997 Trust, as Petitioner asserts Settlor intended. Petitioner also seeks to dissolve Kalil Associates, which holds the Property, and convey the Property to Kalil LP. Petitioner alleges Settlor and all other relevant parties and entities intended and believed Kalil LP held the Property.

         On July 13, 2015, Janice answered the petition and asserted a counterclaim, to which Petitioner replied on July 28, 2015. On July 20, 2015, Jacqueline and Petitioner stipulated to indefinitely extend Jacqueline's time to respond to the petition, and she has not responded. Laura consents to the relief sought.[17]

         Respondent filed a pro se[18] motion seeking relief against the 1997 Trust and Settlor's estate on September 14, 2015. Respondent filed an answer to the petition on November 2, 2015. Respondent opposes reformation of the 1997 Trust. He also asserts two challenges against the 1997 Trust as amended and one claim against the 1989 Trust and 1993 Supplemental Trust Agreement. Finally, Respondent claims he received insufficient consideration when he sold his share in Kalil LP in 2010.

         The parties engaged in discovery, and then in settlement discussions which proved unsuccessful. Respondent moved to amend his answer on October 31, 2016. Over Petitioner's objection, I recommended the Court grant Respondent's motion in a final report dated January 23, 2017.[19] The parties continued with discovery and prepared for trial.

         Due to temporarily heightened prison security, Respondent was unable to participate in the February 28, 2017, pretrial conference and it seemed unlikely he would be able to attend the scheduled trial. I therefore granted the parties leave to file motions for summary judgment and continued the trial. Petitioner filed his motion on March 28, 2017, and his opening brief on April 14, 2017. Respondent filed his response and request for summary judgment on May 2, 2017. Petitioner replied on May 22, 2017. On June 1, 2017, Respondent indicated he had received that reply and stood on his earlier submission. Respondent supplemented his submissions on July 31, 2017.

         On August 14, 2017, I asked for supplemental briefing. Petitioner filed a supplemental brief on August 29, 2017, and Respondent filed a letter in opposition on September 12, 2017. Janice filed a letter taking no position. I took the matter under advisement on the briefs. I issued a draft report on November 3, 2017, and extended the time for filing a notice of exceptions to twenty days due to Respondent's reliance on the prison mail system.

         Petitioner filed a notice of exceptions on November 22, 2017, and "Respondent's response to Master's Report" dated November 21, 2017 was docketed November 28, 2017. Respondent supplemented his response via a letter dated November 25, 2017, which was docketed on November 29. Petitioner filed his opening brief on December 13, 2017, together with a motion for enlargement of time to file the opening brief, which I granted. On January 19, 2018, Petitioner wrote to express his view that his exceptions were ripe for review and to ask that Respondent's exceptions be dismissed as untimely.

         This is my final report on the parties' cross-motions for summary judgment. Exceptions that improved the final report are incorporated herein. Exceptions that are dismissed are addressed in footnotes.

         II. Analysis

         Petitioner contends that Settlor intended the Account to be distributed according to the terms of the 1997 Trust as amended, but mistakenly failed to retitle the Account under the 1997 Trust. The Account was Settlor's most significant asset at the time of his death; the only other significant assets were two promissory notes. Without judicial intervention, the Account would be distributed according to the 1989 Trust as amended by the 1993 Supplemental Trust Agreement, and not according to Settlor's 1997 pourover will and the 1997 Trust as amended. Petitioner asserts Settlor erred because he intended to distribute the Account pursuant to the terms of the 1997 Trust as amended.

         To remedy Settlor's mistake, Petitioner seeks relief from among a hierarchy of choices. Petitioner's preferred remedy is a declaration that the 1997 Trust meets the 1989 Trust's criteria for exercising the power to amend, and acts as an amendment to the 1989 Trust such that it is effectively subsumed into the 1989 Trust. In the alternative, Petitioner seeks reformation of the 1997 Trust so that it amends the 1989 Trust. And as least preferred alternatives, Petitioner seeks a declaration that the 1997 Trust revoked the 1989 Trust, or reformation of the 1997 Trust so that it revokes the 1989 Trust. Petitioner also seeks dissolution of Kalil Associates to permit transfer of the Property to Kalil LP, as Petitioner contends Settlor intended.

         Respondent opposes Petitioner's request to cause the 1997 Trust to be subsumed by, to amend, or to revoke the 1989 Trust. Respondent claims the 1997 Trust is invalid and was created under undue influence by Petitioner, and takes issue with certain of the deductions to his share made in 1997 Trust amendments and in the 1993 Supplemental Trust Agreement. As for the partnership issue, Respondent challenges the terms of the transaction in which he sold his interest in Kalil LP, and claims the Property should be governed by the 1989 Trust.

         "The function of summary judgment is the avoidance of a useless trial where there is no genuine issue as to any material fact."[20] Summary judgment is appropriate where the "pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law."[21] "A fact is material if it might affect the outcome of the suit under the governing law."[22] A material issue of fact exists if "a rational trier of fact could find any material fact that would favor the non-moving party in a determinative way."[23]

         The movant bears the initial burden of demonstrating that there is no question of material fact.[24] When the movant carries that burden, the burden shifts to the nonmoving party "to present some specific, admissible evidence that there is a genuine issue of fact for trial."[25] The court must view the evidence most favorably to the non-moving party.[26] Even so, the non-moving party may not rely on allegations or denials in the pleadings to create a material factual dispute.[27]

         A. Settlor did not intend the 1997 Trust to amend or revoke the 1989 Trust, so the 1997 Trust cannot be deemed to have done so.

         Petitioner first argues that the 1997 Trust should be considered or deemed an amendment and restatement of the 1989 Trust. Petitioner contends that deeming the 1997 Trust to be an amendment of the 1989 Trust creates "one continuous trust" that permits the Account to pass out of probate pursuant to the terms of the 1997 Trust as amended.[28] As a less preferable alternative, Petitioner argues the 1997 Trust should be deemed to have revoked the 1989 Trust.[29] Petitioner contends that the 1997 Trust can be deemed an amendment or revocation without any reformation of the 1997 Trust.

         Petitioner asserts the 1997 Trust satisfies the 1989 Trust's requirements for amendment and revocation. The 1989 Trust states:

Settlor reserves to himself the right, at any time and from time to time, by instrument in writing, lodged with Trustee during Settlor's lifetime, to amend or revoke this Agreement, in whole or in part.[30]

         Petitioner contends the 1997 Trust is an "instrument in writing" that was "lodged with" Settlor, who was Trustee of the 1989 Trust at the time the 1997 Trust was executed. Under Petitioner's theory, the 1989 Trust's broad language allows any "instrument in writing" in Settlor's possession to amend or revoke the 1989 Trust, regardless of whether such instrument expresses an intention to amend, because expression of that intention was not required by the terms of the 1989 Trust. Petitioner concludes that because Settlor intended the 1997 Trust and its amendments to control the Account's disposition, the 1997 Trust should be deemed to have exercised Settlor's power to amend or revoke the 1989 Trust.

         "The settlor of an inter vivos trust has power to revoke or modify the trust to the extent the terms of the trust … so provide."[31] If the trust reserves to the settlor a power to revoke or amend the trust exclusively by a particular procedure, "the settlor can exercise the power only by substantial compliance with the method prescribed."[32] The law requires a settlor to express an intent to revoke, though that expression need not be in formal terms.[33] Intent to revoke or amend can be expressed implicitly, such as by referring to the property that is the subject to the power to revoke or amend, or where the instrument at issue would be meaningless unless it exercised the power to revoke or amend.[34] "Any power that a settlor has to amend a trust dies with him or her."[35]

         Whether the 1997 Trust amended, revoked, or is subsumed within the 1989 Trust is guided by Settlor's intent and whether he expressed any intent to amend or revoke at the time he executed the 1997 Trust. This is a different, and narrower, intent than the intent for the 1997 Trust to govern distribution of the Account. It is undisputed that the 1997 Trust does not formally express any intent to amend or revoke.

         Nor does it express any such intent by reference to the 1989 Trust's property.[36] To the contrary, the 1997 Trust explicitly holds different property than the 1989 Trust. The 1989 Trust identifies its property as "the property set forth in Schedule A." Schedule A lists shares of Compu-Val, a 50% interest in Kalil Associates, and a life insurance policy.[37] The 1993 Supplemental Trust Agreement defines the res of the 1989 Trust as the property held at the time Settlor executed the 1989 Trust "together with all other property transferred to Trustee since that time, and which may be transferred to Trustee in the future from time to time."[38]The 1997 Trust identifies as trust property a $1.00 bill, and empowers Settlor or any other person to add property to the trust res with Settlor's consent.[39] The 1997 pourover will places the residue of Settlor's estate in the 1997 Trust.[40] The 1997 Trust does not express any intent to amend by referring to the 1989 Trust's separate property.

         Finally, the 1997 Trust does not express an intent to amend or revoke the 1989 Trust by being meaningless unless it does so.[41] The 1997 Trust holds the residue of Settlor's estate, estimated at $1.5 million.[42] While that may not fund shares for each beneficiary once the enumerated deductions are taken, the Trust has a corpus and is not a nullity.

         In fact, the evidence supports the conclusion that Settlor did not intend the 1997 Trust to be an amendment or revocation of the 1989 Trust when he executed it. Settlor created the 1997 Trust as a standalone trust. Settlor executed the 1997 Trust only four years after signing the 1993 Supplemental Trust Agreement, which demonstrates his awareness of the 1989 Trust and an effective means of amending it. Settlor again demonstrated his knowledge of a way to clearly express his intent to amend a trust beginning in 2005, when he made his first of many amendments to the 1997 Trust.[43] Assuming arguendo that the 1997 Trust is an "instrument in writing" "lodged with Trustee during Settlor's lifetime, " at the time Settlor lodged it he did not intend it to amend or revoke the 1989 Trust.

         By contrast, the successive trusts at issue in Security Trust Co. v. Spruance, cited by Petitioner, [44] expressed an intent to revoke and addressed the same property, and the later trust would be a nullity if not reformed. In Spruance, the settlor executed three trusts: a first revocable trust in 1923, instructing a trustee to hold and distribute certain insurance policies; a second trust in 1926, which explicitly revoked the 1923 trust and instructed the trustee to distribute those same policies in a different manner; and a third trust in 1931, which explicitly revoked the 1923 trust (not the 1926 trust) and again changed the manner of disposition of the same policies. The Court concluded that the settlor intended the 1931 trust to revoke the 1926 trust because it expressed an intent to revoke and because both trusts expressly dealt with the identical res or corpus identified in the earlier trust.[45]The Court reasoned, "If the earlier one stands, the later one must fall. They are irreconcilable."[46]

         This case is distinguishable for several reasons. First, the Spruance trust contained specific (but flawed) revocation language, whereas Settlor's 1997 Trust contains no language of amendment or revocation. Second, Settlor's two Trusts hold different property and can coexist and function in parallel without conflict. The 1997 Trust did not implicitly or expressly show the intent to amend or revoke the 1989 Trust, as was the case in Spruance. To the contrary, as explained above, the circumstances surrounding the execution of the 1997 Trust indicates Settlor intentionally used language creating a standalone trust instead of language of amendment or revocation.

         The 1997 Trust was created by Settlor as an independent second trust, and is not an amendment to the 1989 Trust. It may be that Settlor intended the 1997 Trust to guide distribution of the Account. But the evidence supports the conclusion that Settlor also intended the 1997 Trust to be an independent, standalone trust when he executed it. I conclude this intent may not be violated or displaced to fix deficiencies in other aspects of Settlor's portfolio management. I recommend the Court deny Petitioner's request for a summary judgment declaring the 1997 Trust to have exercised the 1989 Trust's reserved power to amend or revoke.

         B. Reformation may not remedy Settlor's mistake in failing to retitle the Account because that mistake did not affect specific terms in the 1997 Trust.

         As an alternative to deeming the 1997 Trust to be an amendment to or revocation of the 1989 Trust, Petitioner asks the Court to reform the 1997 Trust to include language of amendment or revocation of the 1989 Trust, based on unilateral mistake by Settlor. I conclude that Settlor's mistake was in titling the Account, and that because that mistake did not affect the expression, inclusion or omission of specific terms in the 1997 Trust - but rather, affects only the title of the Account - reformation is not appropriate.[47]

         Generally, courts cannot consider extrinsic evidence relating to the meaning of specific terms in a written trust to interpret those terms.[48] Where a provision of the trust agreement is clear and unambiguous, the court will not consider extrinsic evidence to vary or contradict the ordinary meaning of the provision.[49] This rule is particularly significant in the context of testamentary documents, where the author is deceased and cannot provide further insight into his intention.[50] Even in the context of a mistake, this Court has refrained from reforming an otherwise proper and unambiguous will.[51]

         But a trust may be rescinded or reformed upon the same grounds as those upon which a transfer of property not in trust may be rescinded or reformed, including mistake.[52] Because a settlor usually receives no consideration for the creation of a trust, a settlor's unilateral mistake may warrant trust reformation.[53]The mistake must be proven by clear and convincing evidence.[54] This high burden of proof is appropriate because the party seeking reformation is seeking to establish that a donative document does not reflect the donor's intention.[55]

         Reformation requires the petitioner to establish by clear and convincing evidence: (1) that a mistake of fact or law, whether in expression or inducement, affected the specific terms of the document; and (2) the settlor's intention.[56] A mistake in expression occurs when the writing does not express the settlor's intent, as is often seen in a scrivener's error.[57] A mistake in the inducement arises when a trust includes a term that was intended to be included, or fails to include a term that was not intended to be included, but the intention regarding the term was the product of a mistake of fact or law.[58] Extrinsic evidence must establish, by clear and convincing evidence and with particularity, that a mistake "affected the expression, inclusion, or omission of specific terms in the document."[59]

         I assume for the sake of this analysis that Settlor intended to distribute the Account according to the 1997 Trust. If that is assumed, I must conclude that Settlor made a mistake. But Settlor's mistake was not a mistake in expression in the language of the 1997 Trust. Settlor made a mistake in failing to retitle the Account in the name of the 1997 Trust.[60] That act is wholly separate from the terms of the 1997 and 1989 Trusts. Had Settlor simply retitled the Account, his trusts would express his intention. There is no error in the language of the 1997 Trust; the error was in Settlor's failure to retitle the Account.[61]

         Settlor's estate planning attorneys also source Settlor's mistake in the Account's titling rather than the Trust's terms. The attorney who prepared the 1997 Trust affirmed:

Had I been aware that the investment account was titled in the name of the 1989 trust I would have certainly counseled Dr. Kalil to re-title it in the name of the 1997 trust since that was the vehicle that Dr. Kalil intended to use to transfer his wealth.[62]

And Settlor's subsequent estate planning attorney who prepared several amendments to the 1997 Trust affirmed similarly:

Had I known that the investment account was titled in the name of the 1989 trust I would have advised Dr. Kalil to change the title of the account to the 1997 trust to make sure his estate plan was properly funded and implemented.[63]

         If Settlor's attorneys had known about the titling of the Account, they would have remedied that error by retitling the Account, not by redrafting the 1997 Trust to be an amendment of the 1989 Trust. There was no scrivener's error - the Trusts' language expresses the Settlor's intent. Settlor's failure to retitle the Account is not a mistake in expression for which reformation is available.

         Whether Settlor's failure to retitle the Account is a mistake in inducement is a closer call. Assuming that Settlor intended to distribute the Account according to the 1997 Trust, it would follow that Settlor was mistaken in believing the Account was titled to permit such distribution at the time Settlor executed the 1997 Trust. But Petitioner has failed to meet his burden of proving by clear and convincing evidence, and with particularity, that the titling mistake affected the expression, inclusion, or omission of specific terms in the 1997 Trust.[64] There is no evidence that Settlor's mistake of fact regarding the Account's title caused the 1997 Trust to include or omit any specific term. To the contrary, the evidence (in the form of Settlor's attorneys' affidavits) indicates the only product of the mistake was the Account's title.

         Petitioner suggests that Settlor's mistake can be fixed by adding a term to the 1997 Trust to make it an amendment of the 1989 Trust. As a practical matter, this may be true. But Petitioner puts the cart before the horse. The inquiry is not whether changing trust language can fix a mistake: it is whether the mistake affected specific trust language at the time that language was drafted. The law requires clear and convincing evidence that the absence of specific amendment language in the 1997 Trust is a product of Settlor's mistake.[65] Petitioner fails to prove the requisite causation. To the contrary, the evidence suggests that if Settlor or his attorneys had recognized his mistake, he would not have added the amendment language Petitioner suggests, but instead would have retitled the Account. Because Settlor's titling mistake did not affect specific terms in the 1997 Trust, reformation is not an available remedy.

         I contrast Settlor's mistake with the illustrated mistakes in inducement in the Property Restatement, supra.

7. G created an inter vivos trust. The trust document did not contain a clause reserving to G a power to revoke the trust. Controlling law provides that a trust is irrevocable in the absence of an expressly retained power to revoke. After G signed the document, G's financial condition changed and G sought to revoke the trust.
Extrinsic evidence shows that G intended to create a revocable trust and did not understand the need for a revocation clause.
If this evidence satisfies the clear-and-convincing-evidence standard of proof, the trust document is reformed to insert a power to revoke.
8. G created an inter vivos trust of the bulk of his assets. The trust document did not contain a clause reserving to G a power to revoke the trust. Controlling law provides that a trust is irrevocable in the absence of an expressly retained power to revoke. After G signed the document, G sought to revoke the trust.
Extrinsic evidence shows that G established the trust when he was in line for a high-level position in the federal government. From the press reports he had read, he mistakenly believed that he had to place all of his assets into an irrevocable trust in order to comply with federal policies on public-service conflicts of interest. G liquidated much of his property, and placed the bulk of his assets into the irrevocable trust. Subsequently, G learned that federal policies did not require him to transfer his assets to an irrevocable trust.
If this evidence satisfies the clear-and-convincing-evidence standard of proof, the trust document is reformed to insert a power to revoke.[66]

         In each of these illustrations, the absence of the power to revoke was the specific product of the settlor's mistake. In Illustration 7, the settlor thought he had created a revocable trust even without a term reserving the power to revoke. In Illustration 8, the settlor thought he had to create an irrevocable trust when he did not. In each illustration, the settlor did not include a term granting a power to revoke because he did not intend to include such a term, but that intention was the product of the settlor's mistake.

         By contrast, Settlor's intention for the 1997 Trust to be a standalone trust instead of an amendment to the 1989 Trust was not the product of his mistake in titling the Account.[67] Settlor's mistake in titling the Account caused erroneous language in the Account's title, not in the 1997 Trust. There is no evidence that Settlor's mistake caused the absence of revocation or amendment language in the 1997 Trust. The Third Restatement of Property does not support reforming the 1997 Trust.

         Petitioner also relies on Roos v. Roos.[68] In Roos, a trust with language that clearly did not conform to the settlor's stated intent was reformed. The preamble of the subject trust stated the settlor intended "to create a trust fund for myself and my wife for our respective lives and for our children upon our decease."[69] But the clause directing income payments to the settlor's children only directed those payments if the settlor's wife predeceased the settlor.[70] If the settlor died first - which he did - the trust did not specify his intention as to the income upon his wife's death, and made no provision for the settlor's children as the preamble stated the settlor intended. Thus, the trustees were faced with an internally inconsistent trust and circumstances under which trust terms would not permit the trustee to carry out the settlor's explicitly stated intent.

         Reformation was warranted in Roos because the settlor made a mistake that was clearly and specifically linked to specific trust language. Here, Settlor's mistake does not affect trust language. Neither the Trusts themselves, nor the extrinsic evidence, indicate any mistake that is clearly and specifically linked to specific trust language. Roos does not compel reformation of the 1997 Trust.

         In conclusion, I recommend the Court deny Petitioner's request to reform the 1997 Trust to compensate for Settlor's mistake in titling the Account. The evidence that Settlor intended for the Account to be distributed according to the 1997 Trust as amended is compelling. Settlor's estate planning attorneys affirmed Settlor intended the 1997 Trust to be the primary vehicle for handling his estate, and neither attorney knew about the 1989 Trust or the titling of the Account.[71]Settlor's many amendments to the 1997 Trust, including sizeable deductions from beneficiaries' shares, indicate he believed the 1997 Trust would be funded in excess of those deductions, requiring funds from the Account.[72] But Settlor's mistake in titling the Account did not cause the omission or inclusion of any specific language in the 1997 Trust. His unilateral mistake affected language in the Account's title, not the 1997 Trust. The high and specific evidentiary burden for reforming a deceased settlor's donative instrument has not been met. I recommend the Court deny Petitioner's motion for summary judgment on Petitioner's Count I for reformation.

         C. Judicial dissolution of Kalil Associates is equitable and appropriate.

         Settlor formed two entities to hold the Property. The first, Kalil Associates, was formed on November 29, 1984, pursuant to the Uniform Partnership Act of the State of Delaware, to own, hold, and manage the Property.[73] The Property was deeded to Kalil Associates on February 1, 1985. The Property was Kalil Associates' only asset. Settlor transferred his economic interest in Kalil Associates to the 1989 Trust, and Claire transferred hers to her own trust executed in 1989.[74]

         In 2000, Ernest D. Palmarella, Esquire, created Kalil LP as an "integral part" of Settlor and Claire's estate plan.[75] Settlor and Claire intended to use Kalil LP to pass the Property to their children in a tax-efficient manner.[76] When forming Kalil LP, Palmarella told Settlor, "The property located at 1702 [Lovering Avenue] will be transferred to [Kalil LP]."[77] Palmarella also created an option agreement for Kalil LP, granting Petitioner the option to purchase the Property upon the deaths of Settlor and Claire, which represented that Kalil LP owned the Property.[78]Palmarella affirmed, "It was always my belief in dealing with Kalil, LP that the [P]roperty had in fact been deeded to the LP. It was only after Dr. Kalil's death that I learned that he never actually took the step of executing and recording a deed from the general partnership to Kalil LP."[79]

         As originally established, Settlor and Claire maintained a 95% limited partnership interest in Kalil LP, and each of their four children received a 1% limited partnership interest.[80] In 2006, Settlor and Claire transferred their interests in Kalil LP to their children, such that Petitioner, Respondent, Janice, and Laura each owned an equal share in Kalil LP.[81]

         Settlor, Claire, and their children proceeded from the point of Kalil LP's creation as if Kalil LP owned the Property. Kalil LP rented the Property to Compu-Val, generating an income stream.[82] Kalil LP reported that rent as income to taxing authorities, representing that Kalil LP owned the Property.[83] Each partner signed the option agreement stating Kalil LP owned the Property.[84] In 2010, Kalil LP bought out Respondent's interest in Kalil LP, financed by a loan from Settlor.[85]Respondent's interest in Kalil LP was priced according to the value of Kalil LP's asset: the Property.[86]

         Petitioner requests that the Court enter a decree of dissolution for Kalil Associates, and direct Petitioner, as executor of the estate of Kalil Associates' surviving general partner, to execute and record a deed for the Property to Kalil LP. Petitioner cites only the maxim that "[e]quity regards that as done which in good conscience ought to be done" as legal support for this remedy.[87] Respondent asserts that since Kalil Associates was never dissolved, Kalil Associates ...


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