In the Matter of the Last Will and Testament of Milton Ray Lomax ( 2019 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
PATRICIA W. GRIFFIN CHANCERY COURTHOUSE
MASTER IN CHANCERY 34 The Circle
GEORGETOWN, DELAWARE 19947
Final Report: October 8, 2019
Draft Report:
Date Submitted: July 3, 2019
Richard E. Berl, Jr., Esquire
Hudson Jones Jaywork & Fisher, LLC
34382 Carpenter’s Way Suite 3
Lewes, DE 19958
Dean A. Campbell, Esquire
Law Office of Dean A. Campbell
110 West Pine Street
PO Box 568
Georgetown, DE 19947
RE: In The Matter of the Last Will and Testament of Milton Ray Lomax
C.A. No. 2018-0434-PWG
Dear Counsel:
In this action, the decedent’s son is challenging the validity of the decedent’s
last will and testament, claiming that the decedent did not have testamentary
capacity to execute the will and that he was unduly influenced by another son. The
challenger also seeks an accounting of his brother’s transactions while acting on
behalf of the decedent. The brother counterclaims for an accounting by the
challenger when he acted as the decedent’s agent. The brother moves for summary
judgment, claiming that the doctrine of unclean hands precludes the relief
In The Matter of the Last Will and Testament of Milton Ray Lomax
C.A. No. 2018-0434-PWG
October 8, 2019
requested by the challenger; he should not be ordered to make an accounting
because guardianship accountings he filed in another state should be given full
faith and credit; and he is entitled to an accounting from the challenger. I
recommend the Court grant the motion for summary judgment in part, and deny it
in part. This is a final report.
I. Background
David Lomax (“David”) filed a petition for review of proof of will under 12
Del. C. § 1309, on June 13, 2018, asking the Court to declare the Last Will and
Testament of Milton Ray Lomax (“2013 Will”) void because Milton Ray Lomax
(“Decedent”) did not have testamentary capacity to execute the 2013 Will and the
2013 Will was a product of undue influence.1 He also asks that Robert Lomax
(“Robert”), his brother, be required to file an accounting of all his transactions
involving the Decedent’s financial resources since January of 2013. The 2013
Will, which was executed on January 23, 2013, disinherited David, splitting the
Decedent’s estate between Robert and another brother, Thomas Lomax
1
Docket Item (“D.I.”) 1. I use first names in pursuit of clarity and intend no familiarity
or disrespect.
2
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(“Thomas”).2 It differed from the Decedent’s earlier wills, which devised his
estate to his three sons (David, Robert and Thomas) equally.3
Robert’s August 16, 2018 answer denies that the 2013 Will is void; the
Decedent was incompetent when he executed that Will; Robert exerted undue
influence over the Decedent; or that Robert should account for his transactions
involving the Decedent’s finances.4 Robert’s counterclaim seeks an accounting
from David for his actions as Decedent’s agent under a power of attorney executed
on October 2, 2012 and revoked on October 23, 2012. Those actions resulted in
felony charges of theft and misappropriation of the Decedent’s assets being filed
against David in North Carolina.5 David’s September 12, 2018 reply admits that
David was charged with offenses in North Carolina, but denies that he violated his
fiduciary duty as Decedent’s agent and requests that the counterclaim be
dismissed.6
Robert filed a motion for summary judgment (“Motion”) on May 17, 2019.7
He claims that the doctrine of unclean hands precludes the relief requested by
2
Id., Ex. I.
3
Id., Ex. C. The Decedent’s 1981 Will left his estate to his spouse, with his three sons as
residuary beneficiaries. Id., Ex. A.
4
D.I. 6.
5
Id.
6
D.I. 7.
7
D.I. 21.
3
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David, since David plead guilty to a felony, theft by false pretense, and has used a
power of attorney to take $105,000.00 from the Decedent’s assets; the accountings
Robert filed with a North Carolina court as guardian for the Decedent should be
given full faith and credit; and David must be ordered to provide an accounting for
monies he obtained as the Decedent’s agent.8 David responds, on June 19, 2019,
that the doctrine of unclean hands does not apply because there is no connection
between the alleged misconduct and the relief sought; the accounting in North
Carolina is not entitled to protections under full faith and credit; and Robert’s
request for an accounting from David is improper, since the transactions occurred
over five years ago, David acted under the auspices of a valid power of attorney,
and David’s North Carolina criminal sentence did not provide for restitution.9
Robert’s July 3, 2019 reply brief reiterates that David’s reprehensible
conduct is offensive to the integrity of the Court and argues David’s conduct and
this litigation are both related to the Decedent’s estate.10 He also asserts the five
guardianship accountings filed by Robert in North Carolina involved similar
claims and were approved by the court. Finally, Robert claims he is entitled to an
accounting from David, since any delay related to the extended length of time the
8
D.I. 22.
9
D.I. 25.
10
D.I. 27.
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criminal charges remained pending, David’s power of attorney did not allow him
to engage in criminal self-dealing, and the decision on restitution, or lack of
decision, in the criminal case does not bind this case.
II. Standard of Review
Under Court of Chancery Rule 56, the court grants a motion for summary
judgment when “the moving party demonstrates the absence of issues of material
fact and that it is entitled to a judgment as a matter of law.”11 The moving party
bears the burden of demonstrating that no material issues of fact are in dispute and
that it is entitled to judgment as a matter of law. 12 Once the moving party has
satisfied that burden, it falls on the non-moving party to show that there are factual
disputes. Evidence must be viewed “in the light most favorable to the non-moving
party.”13 Summary judgment may not be granted when material issues of fact exist
or if the Court determines that it “seems desirable to inquire more thoroughly into
the facts in order to clarify the application of law to the circumstances.”14
11
Wagamon v. Dolan, 2012 WL 1388847, at *2 (Del. Ch. Apr. 20, 2012); see also
Cincinnati Bell Cellular Sys. Co. v. Ameritech Mobile Phone Serv. of Cincinnati, Inc.,
1996 WL 506906, at *2 (Del. Ch. Sept. 3, 1996), aff’d, 692 A.2d 411 (Del. 1997).
12
Wagamon, 2012 WL 1388847, at *2; Lundeen v. Pricewaterhousecoopers, LLC, 2006
WL 2559855, at *5 (Del. Super. Aug. 31, 2006).
13
Will. v. Geier, 671 A.2d 1368, 1389 (Del. 1996) (citing Merrill v. Crothall-
American, Inc., 606 A.2d 96, 99 (Del. 1992)).
14
Williams, 671 A.2d at 1388-89 (citing Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del.
1962)); In re Estate of Turner, 2004 WL 74473, at *4 (Del. Ch. Jan. 9, 2004) (citation
omitted).
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III. Analysis
The first issue is whether the doctrine of unclean hands precludes
David from obtaining relief in this action. Under the unclean hands doctrine,
equitable relief is denied “where the litigant’s own acts offend the very sense of
equity to which [the litigant] appeals,” if that inequitable conduct relates directly to
the underlying litigation.15 The Court of Chancery has broad discretion in deciding
whether to grant relief under the unclean hands doctrine.16 “Defendants bear the
burden of pleading and proving ‘unclean hands’ as an affirmative defense.” 17 For
the unclean hands doctrine to apply, “the inequitable conduct must have an
‘immediate and necessary’ relation to the claims under which relief is sought,”18
and the litigant must engage in “reprehensible conduct in relation to the matter in
controversy.”19
15
NHB Advisors, Inc. v. Monroe Capital LLC, 2013 WL 6906234, at *2 (Del. Ch. Dec.
27, 2013) (citations omitted); Nakahara v. NS 1991 Am. Tr., 718 A.2d 518, 522 (Del. Ch.
1998).
16
Cf. RBC Capital Markets, LLC v. Jervis, 129 A.3d 816, 876 (Del. 2015) (citing
SmithKline Beecham Pharm. Co. v. Merck & Co., 766 A.2d 442, 448-49 (Del. 2000)
(citation omitted)).
17
Niehenke v. Right O Way Transp., Inc., 1996 WL 74724, at *2 (Del. Ch. Feb. 13,
1996).
18
Nakahara, 718 A.2d at 523.
19
In re Rural/Metro Corp. Stockholders Litig., 102 A.3d 205, 237-38 (Del. Ch. 2014)
(citing Portnoy v. Cyro-Cell Int’l, Inc., 940 A.2d 43, 80-81 (Del. Ch. 2008)).
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For the Court to determine that the unclean hands doctrine applies in this
case, Robert must prove that David’s inequitable conduct relates directly to this
litigation and has an “immediate and necessary”’ relationship to the claims under
which relief is sought. In this litigation, David is challenging the validity of the
2013 Will under 12 Del. C. § 1309, claiming the Decedent lacked testamentary
capacity and the 2013 Will was a product of undue influence. “Under Delaware
law, all will contests start with the presumption that a testator had the capacity to
make a will at the time it was made.”20 “The party challenging testamentary
capacity bears the burden of proving that the decedent was legally incapable of
executing a valid will.”21 Similarly, the challenger “carries the burden of proving
that the will was a product of undue influence.”22
To have the Decedent’s 2013 Will declared invalid, David has the burden of
showing the Decedent lacked testamentary capacity when he executed the will or
that the 2013 Will was a product of undue influence. David plead guilty in North
Carolina, on December 20, 2018, to the Class H felony of “obtaining property by
false pretenses,” when he removed $105,000.00 from the Decedent’s credit union
20
In re Justison, 2005 WL 217035, at *6 (Del. Ch. Jan. 21, 2005); see also In re Baran,
2017 WL 2491517, at *5 (Del. Ch. May 26, 2017); In re Langmeier, 466 A.2d 386, 389
(Del. Ch. 1983).
21
In re Justison, 2005 WL 217035, at *6; see also In re Baran, 2017 WL 2491517, at *5;
In re Langmeier, 466 A.2d at 389.
22
In re Justison, 2005 WL 217035, at *6.
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account on October 23, 2012 by using the Decedent’s power of attorney.23 I find
no direct relation, however, between David’s misconduct and the matter in
controversy here. David’s misconduct does not affect the validity of the 2013
Will, the Decedent’s capacity to execute that Will, or whether it was a product of
Robert’s undue influence. Robert, not David, took the Decedent to have the 2013
Will prepared.24 I disagree with Robert’s argument that this litigation is directly
related to David’s misconduct because it involves the Decedent’s assets – whether
while he was living or after his death.25 Such claims are beyond the scope of this
action and I decline to apply the doctrine of unclean hands, as a matter of law, or to
recommend that the Court grant summary judgment on this issue.26
The second issue is whether the accountings Robert filed with a North
Carolina court as the Decedent’s guardian should be given full faith and credit by
this Court, precluding David’s request for an accounting from Robert. Under the
United States Constitution and the Full Faith and Credit Act (“FFCA”), every state
is required to treat a judgment of another state with the same respect that it would
23
D.I. 22, Ex. L, M. David disputes some of the circumstances surrounding his actions,
and whether he repaid some of the monies, but not that he acted. See Id., Ex. M, at 11-12,
20-21.
24
D.I. 1, ¶ 12.
25
Robert argues David’s conduct and this litigation are both related to the Decedent’s
estate – “first the estate owned in life by Milton Lomax, and then the same estate
transitioned after his death.” D.I. 27, at 6-7.
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receive in a court of the rendering state.27 The FFCA has “long been understood to
encompass the doctrines of res judicata, or ‘claim preclusion’ and collateral
estoppel, or ‘issue preclusion.’”28 Res judicata, or claim preclusion, bars all claims
that were litigated or could have been litigated in the earlier action.29 For collateral
estoppel, a judgment in a prior suit operates to preclude relitigation of a factual
issue that was litigated and decided in a prior suit between the same parties or their
privies, in a subsequent suit on a different cause of action.30 When applying the
preclusion analysis to a judgment from another state, the foreign judgment should
be given the same effect “that it has in the state of rendition with respect to the
persons, the subject matter of the action and the issues involved.”31
Under North Carolina law, res judicata applies when a party shows “that the
previous suit resulted in a final judgment on the merits, that the same cause of
action is involved, and that both the party asserting res judicata and the party
26
See, e.g., Sloan v. Segal, 996 A.2d 794, at *6 (Del. 2010).
27
See In re Vale for Asche, 2013 WL 3804584, at *8 (Del. Ch. July 19, 2013) (citing U.S.
Const. art. IV § 1, the Full Faith and Credit Act, 28 U.S.C. §1738, and Matsushita Elec.
Indus. Co., Ltd. v. Epstein, 516 U.S. 367, 373 (1996)); In re Vale, 2015 WL 721038, at *3
(Del. Ch. Feb. 19, 2015).
28
In re Vale for Asche, 2013 WL 3804584, at *8 (citation omitted).
29
O’Marrow v. Roles, 2013 WL 3752995, at *3 (Del. Ch. July 15, 2013).
30
Cf. Columbia Cas. Co. v. Playtex FP, Inc., 584 A.2d 1214, 1216 (Del. 1991);
O’Marrow, 2013 WL 3752995, at *3.
31
In re Wickes Tr., 2008 WL 4698477, at *5 (Del. Ch. Oct. 16, 2008) (citation omitted).
9
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against whom res judicata is asserted were either parties or stand in privity with
parties.”32 And, a party asserting collateral estoppel “is required to show that ‘the
earlier suit resulted in a final judgment on the merits, that the issue in question was
identical to an issue actually litigated and necessary to the judgment, and that both
the party asserting collateral estoppel and the party against whom collateral
estoppel is asserted were either parties to the earlier suit or were in privity with
parties.’”33 “In general, privity involves a person so identified in interest with
another that he represents the same legal right.”34
Robert has not proven that he is entitled to judgment as a matter of law, or
that there are no material issues of fact, related to his claim that the FFCA would
preclude him from providing an accounting. I do not have sufficient information
about the guardianship accountings to conclude that res judicata or collateral
estoppel would apply under North Carolina law. Issues remain on whether David
would be considered a party or in privity with a party related to the guardianship
accounting (such that David’s interests would be identified as representing the
same legal right as those involved in the guardianship), whether the financial
guardianship matters were actually litigated, whether approval of the accounting by
32
Will. v. Peabody, 719 S.E.2d 88, 92 (N.C. Ct. App. 2011) (citation omitted); see
also WMS, Inc. v. Alltel Corp., 647 S.E.2d 623, 626 (N.C. Ct. App. 2007).
33
Williams, 719 S.E.2d at 93 (citation omitted).
34
Id., at 94 (citation omitted).
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the clerk of court would be considered a final judgment and, ultimately, whether
the claims and the issues in the guardianship and the accounting being sought are
identical. A distinction exists between David’s claim, which addresses all
transactions Robert conducted since January of 2013, and the guardianship
accountings, which do not cover the period between January of 2013 and May 8,
2013, when Robert was appointed the Decedent’s guardian.35 I recommend the
Court deny Robert’s motion for summary judgment on the issue of whether the
FFCA prevents him from having to provide an accounting to David.
Finally, Robert seeks summary judgment on his claim that he is entitled to
an accounting from David for the period that David served as the Decedent’s agent
under a durable power of attorney that was executed and recorded in North
Carolina on October 2, 2012. By signing a power of attorney, the attorney-in-fact
creates “a common law fiduciary relationship” and “must observe the duty of
loyalty by acting in the best interest of the principal.”36 While David was acting as
the Decedent’s agent, he owed the Decedent fiduciary duties. The power of
attorney required that the agent “provide an accounting for all funds handled and
all acts performed as my Agent as required under state law or . . . at the request of
35
D.I. 1, Ex. K (showing Robert was appointed the Decedent’s guardian on May 8,
2013); see also D.I. 27, Ex. A (showing the guardianship accounting period started on
May 14, 2013).
36
Cf. Lingo v. Lingo, 3 A.3d 241, 244 (Del. 2010), as corrected (June 24, 2010).
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any authorized personal representative, fiduciary or court of record acting on my
behalf.”37 It is clear from the power of attorney itself that the principal intended,
and the agent understood, that an accounting would be required. Because this
power of attorney was created in North Carolina, North Carolina law governs.38
And, the North Carolina Uniform Power of Attorney Act provides that a personal
representative of the estate of a deceased principal and “[a]ny other interested
person,” may compel an accounting “by the agent, including the power to compel
the production of evidence substantiating any expenditure made by the agent from
the principal’s assets.”39
David’s arguments against the accounting are unpersuasive. David claims
an accounting is not needed because he acted under a valid power of attorney and
did not know that the power of attorney had been revoked at the time he withdrew
the funds from the Decedent’s account as his agent. The Court has the authority to
order David to provide an accounting of his actions under a valid power of
attorney. And, even assuming that David did not know about the revocation when
37
D.I. 25, Ex. A.
38
Mascari v. Schmidt, 2017 WL 3189551, at *3 (Del. Ch. June 16, 2017), adopted, (Del.
Ch. 2017) (“The [Durable Personal Power of Attorney Act, Title 12, Chapter 49A of the
Delaware Code] does not govern a power of attorney created pursuant to the laws of a
different state.”).
39
N.C. Gen. Stat. Ann. § 32C-1-116.
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he acted and would be protected under North Carolina law (since his actions
occurred in North Carolina), his self-dealing (making out and cashing checks to
himself for $105,000.00), was in violation of his duty to act in the Decedent’s best
interest and beyond his authority under the power of attorney. The power of
attorney authorized him to provide for the support and protection of the Decedent,
including for the Decedent’s “food, lodging, housing, medical services, recreation
and travel,” and precluded him, as the agent, from gifting, appointing, assigning or
designating the Decedent’s assets to himself, his creditors or to discharge his legal
obligations.40
Further, I disagree with David’s claim that Robert forfeited the chance to
examine these transactions because he did not challenge them for five years while
the Decedent was alive. David’s actions as the Decedent’s agent remained under
consideration in a criminal case for five years, or until December 20, 2018 (six
months after this case had been initiated). And, his assertion that the North
Carolina court’s failure to order restitution in the criminal case against David
serves as the law of the case is incorrect. “The ‘law of the case’ is established
when a specific legal principle is applied to an issue presented by facts which
remain constant throughout the subsequent course of the same litigation.”41 The
40
D.I. 25, Ex. A, ¶¶ 7, 8.
41
Frederick-Conaway v. Baird, 159 A.3d 285, 296 (Del. 2017) (citation omitted).
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doctrine, “by its terms, contemplates one continuous action within the same court
system.”42 I do not find that the law of the case applies in this situation, since the
decision not to order restitution in the criminal charge against David did not occur
in the course of this litigation, or in the Delaware court system. And, in the North
Carolina court, the prosecutor and the defense counsel told the Court that
restitution would be addressed in this civil litigation.43 So, contrary to David’s
assertion that the Court declined to order restitution because it “impliedly
recognize[ed] the validity of the power of attorney,” the North Carolina court most
likely relied upon counsels’ statements that David’s financial liability for his
actions was going to be addressed in this action.44 Accordingly, I find that, as a
matter of law, Robert is entitled to an accounting addressing actions taken by
David as the Decedent’s agent under the power of attorney, and recommend the
Court grant summary judgment on this issue. The accounting should be submitted
within 60 days of the date this report becomes final. The issue regarding what
42
Id. (citation omitted).
43
The prosecutor stated: “[restitution was going to be addressed in civil litigation] going
on in New England and we have determined to allow the civil attorneys in New England
sort out what offset, if any, there would be for the conduct for that amount of money
rather than have money come through our clerk’s office in bits and pieces. Let them sort
it out in New England.” D.I. 21, Ex. M, at 17-18. (I assume that the prosecutor meant
this litigation, and incorrectly referred to Delaware as “New England.”) This is confirmed
by the statement of David’s counsel in the North Carolina criminal matter that addressing
the money was “going to one of the issues in the State proceeding pending in Delaware
[as to] whether that actually happened.” Id., at 20-21.
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restitution, if any, is owed remains to be decided, once the accounting is
completed.45
IV. Conclusion
For the reasons set forth above, I recommend that the Court deny Robert’s
motion for summary judgment in part, and grant it in part. The motion should be
denied because Robert has not met his burden of showing that, as a matter of law,
the doctrine of unclean hands prevents David from seeking the relief he requests,
or that the full faith and credit clause applies so that Robert’s accountings in a
North Carolina guardianship preclude him from providing an accounting to David.
However, I recommend the Court grant summary judgment on Robert’s
counterclaim that David provide an accounting to him for his transactions as the
Decedent’s agent, and order that the accounting be submitted within 60 days after
this report becomes final. This is a final report and exceptions may be taken under
Court of Chancery Rule 144.
Respectfully,
/s/ Patricia W. Griffin
Patricia W. Griffin
Master in Chancery
44
See D.I. 25, at 14-15.
45
The accounting should focus on the monies identified in the North Carolina criminal
matter as taken by David from the Decedent and any proof of David’s return of those
monies.
15