IMO The Jeannette T. McDowell Trust U/A 5/1/1996 ( 2021 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN THE MATTER OF: )
THE JEANNETTE T. MCDOWELL ) C.A. No. 2019-0515-PWG (JRS)
TRUST U/A 5/1/1996 )
)
IN THE MATTER OF: )
THE JEANNETTE T. MCDOWELL ) ROW File No. 13133-S-PWG (JRS)
TRUST U/A 5/1/1996 )
ORDER UPON REMAND
This 8th day of March, 2021, the Court having reviewed the Order of
the Supreme Court of Delaware, dated March 3, 2021, remanding this matter to this
Court for further action, it appears to the Court that:
1. On June 8, 2020, this Court entered an Order Overruling Exceptions
and Affirming Master’s Order (the “Order”), in which it affirmed decisions of a
Master in Chancery denying exceptions brought by John W. McDowell, Jr.
(“Mr. McDowell”) to the First and Final Accounting for the Estate of Jeannette T.
McDowell and granting a Petition to Terminate Trust Or In the Alternative Appoint
a Trustee (the “Petition”) for the Jeannette T. Powell Trust (the “Trust”).1
1
D.I. 38.
2. Mr. McDowell appealed the Order on June 29, 2020.2 After full
briefing, the Supreme Court remanded the matter to this Court to address
Mr. McDowell’s exceptions relating to the Trust. Upon review of the Order, this
Court agrees that the exceptions relating to the Trust were not adequately addressed
in the Order.
3. The Trust provides that Donald L. McDowell (“Donald”) is to serve as
successor trustee of the Trust.3 The Trust is to be administered for the benefit of its
beneficiaries, with Mr. McDowell to receive all net income from the Trust during
his lifetime, Mr. McDowell’s son, John W. McDowell, III, to receive all net income
from the Trust following his father’s death, and the then-remaining principal of the
Trust to be distributed per stirpes to four remainder beneficiaries upon the death
John W. McDowell, III. 4
4. In failing health, Donald, then 88 years old, petitioned the Court of
Chancery either to terminate the Trust or appoint a substitute trustee. 5 Notice of the
Petition was given to all constituents with an interest, including Mr. McDowell, his
2
D.I. 39.
3
D.I. 1, Ex. A (“Trust”), Art. 2A.
4
Id. Art. 7.
5
D.I. 1. The Trust named Wilmington Trust Company as successor trustee if Donald is
unable to serve, but Wilmington Trust renounced because the Trust assets did not meet
Wilmington Trust’s minimum assets under management threshold. Trust, Art. 2A.
2
son and the living remainder beneficiaries. Mr. McDowell and his son appeared at
the October 31, 2019 hearing on the Petition and stated their positions that the Trust
should be terminated.6 Both opposed the appointment of a substitute trustee. 7 More
specifically, Mr. McDowell maintained the Trust should be terminated and the
corpus of the Trust should immediately be distributed 50% to him and 50% to his
son. 8
5. At the conclusion of an often contentious hearing, the Master
announced her final ruling on Donald’s Petition. 9 Donald was relieved as trustee;
the Petition to terminate the Trust was denied; and the alternative Petition to appoint
a substitute trustee, Supportive Care Solutions, Inc. (“Supportive Care”), was
granted. The Master explained that, in keeping with the paramount importance of
adhering to the intent of the testator, termination of the Trust could not be justified
on the record before the Court. The Master also explained that Donald had done his
best to find a substitute trustee that would comply with the Trust’s requirements, but
6
D.I. 21. (Transcript of October 31, 2019 hearing on Petition to Terminate) (“Tr.),
at 16, 21.
7
Id. at 17, 22.
8
Id. at 38.
9
Id. at 13, 16, 40–41, 48–49 (examples of Mr. McDowell’s behavior during the hearing).
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after an exhaustive search, no qualified trust institutions would agree to serve.10
Accordingly, the Master approved the appointment of Supportive Care as substitute
trustee for the Trust, a provider well-known to the Court as providing excellent fee-
for-service fiduciary guardianship services. 11
6. Mr. McDowell filed exceptions to the Master’s decision. In essence,
Mr. McDowell reiterated his position that the Trust should be terminated and its
corpus distributed immediately to him and his son. As for the appointment of
Supportive Care as substitute trustee, Mr. McDowell’s principal objection was that
he had “never heard of” Supportive Care prior to the filing of Donald’s Petition.12
7. The Court has conducted a de novo review of the factual and legal
conclusions in the Order.13 The Court has carefully reviewed the record and has
determined that it is possible to conduct a de novo review without conducting a
further evidentiary hearing.14 The exceptions do not turn on dispositive credibility
determinations that would require the Court to view the witnesses. 15
10
Counsel for Donald spoke with 25 qualified trust institutions. For various reasons, none
would agree to serve. Tr. at 33–35.
11
Id. at 42–47.
12
D.I. 14.
13
See DiGiacobbe v. Sestak, 743 A.2d 180, 184 (Del. 1999).
14
See id.15
See id.; accord Lynch v. City of Rehoboth Beach, 2005 WL 2000774, at *1 (Del. Ch.
Aug. 16, 2005) (“When the parties except to one or more of the Master’s findings from the
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8. The Court of Chancery may appoint a trustee for a Delaware trust when
it concludes that the “objects and purposes of any such trust are in danger of not
being performed or effectuated.” 16 When determining whether to appoint a trustee,
the court’s first reference point is the intent of the settlor as stated in the trust
document, and such intent “should not be disregarded in the absence of compelling
circumstances.”17 But, in circumstances where “a settlor’s express intent runs up
against circumstances that it is obvious the settlor never foresaw at the creation of
the trust,” the court may depart from the trust and exercise its appointment power in
a manner it determines best furthers the purpose of the trust.18
9. Here, the designated trustee, Donald, is no longer able to serve in that
capacity. The settlor’s choice for successor trustee, Wilmington Trust, has
renounced as permitted by the Trust.19 The trustee’s counsel diligently searched for
a substitute trustee that would meet the requirements set forth in the Trust for an
evidence in the case, the Court can read the record that is relevant to the exceptions raised
and draw its own factual conclusions.”).
16
12 Del. C. § 3501.
17
McNeil v. McNeil, 798 A.2d 503, 514 (Del. 2002).
18
Hurd v. Hurd, 2020 WL 504980, at *1 (Del. Ch., Jan. 31, 2020).
19
Trust, Art. 3D.
5
institutional trustee.20 None were willing to serve. 21 Accordingly, Donald filed a
Petition that presented the Court with two alternatives: either terminate the Trust or
appoint a substitute trustee that does not match the criteria set forth in the Trust.
10. The Master conducted a thorough evidentiary hearing during which she
heard from all concerned. At the conclusion of the hearing, in ruling on the Petition,
the Master began where the Court must begin: with a review of the Trust itself.
There, the settlor made clear her intent that the corpus of the Trust should be
administered not by Mr. McDowell or his son, but by a trustee. 22 Nothing in the
Trust suggests the settlor was comfortable turning over the corpus of the Trust
directly to these beneficiaries. Nor is there evidence the settlor intended the corpus
of the Trust to be distributed directly to Mr. McDowell and his son without regard
for the remainder beneficiaries. Thus, the Trust itself revealed the settlor would not
have supported termination of the Trust under the circumstances.
11. The Master then concluded that all reasonable efforts had been made to
comply with the settlor’s intent with respect to the appointment of a successor
trustee. But no institutional trustee that met the criteria was willing to serve, thus
revealing it was impossible to fulfill the letter of the Trust regarding the appointment
20
Trust, Art. 2B.
21
Tr. at 33–35.
22
Trust, Art. 7.
6
of a successor trustee. There was no meaningful challenge to that conclusion offered
at the hearing, and none has been offered since. Finally, the Master reviewed the
qualifications of the proffered substitute trustee, Supportive Care, and concluded that
its extensive experience serving as fiduciary in its role as guardian of the property
of adult wards made it a worthy candidate to serve as trustee of the Trust under the
circumstances.
12. After de novo review, I am satisfied the Master’s decision was well
grounded in the law and the facts of record. I see no basis to overturn it.23
Termination of the Trust is contrary to the settlor’s intent as stated in the Trust. And,
failing the agreement of a trust institution meeting the criteria stated in the Trust to
serve as trustee, Supportive Care is a qualified substitute trustee given its extensive
experience serving in a fiduciary capacity in the protection and administration of
property for the benefit of others.
13. Based on the foregoing, the exceptions to the Order are overruled and
the Master’s decision is affirmed.
IT IS SO ORDERED.
/s/ Joseph R. Slights III
Vice Chancellor
23
In re Erdman, 2011 WL 2191680, at *1 (Del. Ch. May 26, 2011).
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