IMO of The Doris J. Foster Inter Vivos Declaration of Trust

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
PATRICIA W. GRIFFIN CHANCERY COURTHOUSE
MASTER IN CHANCERY 34 The Circle
GEORGETOWN, DELAWARE 19947
Date Submitted: May 17, 2022
Draft Report: August 22, 2022
Final Report: November 21, 2022
John J. Foster, Jr. Raymond E. Tomasetti, Jr., Esquire
32502 Sea Oak Lane Tomasetti Law, LLC
Millsboro, Delaware 19966 1100 Coastal Highway, Unit 3
Fenwick Island, Delaware 19940
RE: In the Matter of The Doris J. Foster Inter Vivos Declaration of Trust
C.A. No. 2018-0589-PWG
Dear Mr. Foster and Mr. Tomasetti:
Pending before me is a petition for an accounting and related relief regarding
a Florida trust. A trust beneficiary alleges that the co-trustees of the trust, who are
also beneficiaries under the trust, improperly reduced his distributions from the
trust and failed to provide trust accountings. After trial, I determine that the co-
trustees did not furnish the required accountings to the beneficiary but that further
remedy for an accounting is not needed. I also find that the smaller distributions to
the beneficiary were justified, in part, under the trust’s terms and due to the setoff
of monies owed by the beneficiary to the trust. But, I conclude that the co-trustees
did not fully comply with the trust’s terms and, as a result, failed to give the
beneficiary his full share. I recommend that the Court grant judgment in favor of
the beneficiary in part, and against him in part, and impose a constructive trust
In the Matter of the Doris J. Foster Inter Vivos Declaration of Trust
C.A. No. 2018-0589-PWG
November 21, 2022
upon prior distributions made to the co-trustees under the trust to provide the
beneficiary’s full share. This is my final report.1
I. Background2
Doris J. Foster (“Settlor”) executed the Doris J. Foster Intervivos
Declaration of Trust (“Trust”) on March 13, 1989. 3 The Trust was subsequently
amended by the First Amendment of the Doris J. Foster Intervivos Declaration of
Trust dated May 23, 1997;4 completely amended and restated by the Doris J. Foster
Intervivos Declaration of Trust dated January 28, 2000 (“Restatement”);5 amended
by the Amendment of the Doris J. Foster Intervivos Declaration of Trust dated
May 2, 2003 (“Second Amendment”);6 amended by the Amendment of the Doris J.
Foster Intervivos Declaration of Trust dated January 6, 2005 (“Third
Amendment”);7 amended by the Amendment of the Doris J. Foster Intervivos
Declaration of Trust dated October 5, 2005 (“Fourth Amendment”);8 and amended
1
This report makes the same substantive findings and recommendations as my August,
22, 2022 draft report to which no exceptions were filed. See Docket Item (“D.I.”) 32.
2
I refer to the transcript of the trial on May 17, 2022 as “Trial Tr.” and to Respondent’s
trial exhibits as “Resp’t Ex.”
3
Resp’t Ex. 1, at 1.
4
Id., at 31.
5
Id., at 40.
6
Id., at 70.
7
Id., at 77.
8
Id., at 84.
2
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by Amendment to the Doris J. Foster Intervivos Declaration of Trust dated March
22, 2007 (“Fifth Amendment”). 9 The Trust is a Florida trust and is governed by
Florida law.10 After Settlor’s death (if her spouse does not survive her), the Trust
provides that its assets will be distributed among Settlor’s children – John J. Foster,
Jr. (“John”), Caroline D. Wilt, Patricia S. Foster (“Patricia”), Mark A. Foster
(“Mark”), Martha A. Conover (“Martha”), and Mary J. Cannon, subject to
specified adjustments to John’s and Patricia’s shares.11
Settlor died on December 2, 2014.12 Under the terms of Settlor’s Last Will
& Testament (“Will”), Settlor’s estate largely passed to the Trust.13 Under the
Trust’s terms, Martha and Mark were appointed successor co-trustees of the Trust
upon Settlor’s death.14 Martha and Mark undertook the duties of winding up the
9
Id., at 92.
10
Id., at 41 (Restatement, §2.2).
11
Id., at 84-86 (Fourth Amendment, §9.3). I use first names in pursuit of clarity and
intend no familiarity or disrespect.
12
D.I. 1, ¶ 5.
13
Resp’t Ex. 1, at 97-98 (Will, arts. IV, V). Although the memorandum is not a part of
the court record, trial testimony indicated that there was a memorandum addressing
specific devises of Settlor’s personal property. See Trial Tr. 80:4-19; Resp’t Ex 1, at 97
(Will, art. IV); id., at 45 (Restatement, §7.6).
14
Resp’t Ex. 1, at 93 (Fifth Amendment, §13.2).
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Trust and making distributions to themselves and the Settlor’s other children.15
Martha and Mark wound up the Trust at the end of 2016.16
On August 8, 2018, John filed the Petition for Accounting and other Relief
(“Petition”), naming Martha and Mark as Respondents.17 The Petition alleges that
John did not receive an equal share of the distributions as required by the Trust and
that Martha and Mark failed to provide information about the Trust to him.18 The
Petition seeks an accounting of the Trust and an equal distribution to John either
from Trust funds or a surcharge against Martha and Mark.19
On August 31, 2018, Martha and Mark filed their Answer, contending that
Settlor and her husband, John J. Foster, Sr. (“Father”), advanced considerable
funds to John during their lifetime in the form of loans that were assigned to the
Trust.20 Martha and Mark indicated that, when making the Trust’s final
distribution, they set off the loans payable to the Trust from John’s distribution. 21
15
See Resp’t Ex. 2.
16
See Resp’t Ex. 9; Trial Tr. 69:11-70:11.
17
D.I. 1.
18
Id., ¶¶ 6-8.
19
Id., at 2.
20
D.I. 4.
21
Id., ¶¶ 6-7.
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The parties then engaged in discovery.22 John’s attorney withdrew in
October 2020.23 This matter was scheduled for a hearing on multiple occasions
and rescheduled due to COVID and John’s repeated continuance requests.24 Trial
occurred in this matter on May 17, 2022.25 I then issued a draft report on August
22, 2022, and no exceptions were filed.
II. Analysis
A. Accountings
Under the terms of the Trust, Martha and Mark were required to provide
annual accountings to the beneficiaries after Settlor’s death.26 Additionally, under
Florida law, the trustee of a Florida trust must keep the beneficiaries of a trust
“reasonably informed of the trust and its administration,”27 and “provide a trust
22
See D.I. 6; D.I. 10; D.I. 12.
23
See D.I. 16.
24
See D.I. 17; D.I. 18; D.I. 19; D.I. 20; D.I. 24; D.I. 25.
25
See D.I. 30. On May 6, 2022, John filed a request for a continuance. See D.I. 26. I
denied that motion for a continuance on May 9, 2022, finding that adequate grounds did
not exist to continue the trial again. See D.I. 28. On May 16, 2022, John filed a letter
seeking either reconsideration of my decision to deny the motion for a continuance or
making a renewed motion for a continuance. See D.I. 29. At the beginning of trial, I
addressed this letter request as a motion for reargument and denied it. See Trial Tr. 10:23-
13:2.
26
Resp’t Ex. 1, at 54 (Restatement, §13.3).
27
Fla. Stat. §736.0813.
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accounting … to each qualified beneficiary at least annually”28 in the form of “a
reasonably understandable report.”29
The uncontroverted evidence presented at trial showed that Mark and
Martha did not provide annual accountings. John testified that he did not recall
receiving any information about the Trust’s administration from Settlor’s death
until the Petition was filed.30 Martha testified that she did not communicate with
John regarding the administration of the Trust.31 Thus, the evidence indicates that
Martha and Mark did not fulfill this duty as trustees.
But, I find a further accounting remedy, as John has requested, is not
warranted in this matter. Here, Martha and Mark provided John with the relevant
28
Fla. Stat. §736.0813(d).
29
The report should detail trust assets and significant transactions affecting trust
administration during the reporting period. Fla. Stat. §736.08135.
30
Trial Tr. 20:9-14; id. 28:11-13. John also seemed to take issue with the actions of
Settlor and Father, contending that they had given him no information about their estate
plans since the mid-1990s. See id. 8:18-20; id. 18:13-16; id. 19:24-20:2; id. 80:20-81:8.
John’s frustration is understandable but provisions of the Trust were revocable while
Settlor was alive, so Settlor had no obligation as trustee, during her lifetime, to advise her
contingent beneficiaries regarding the status of the Trust. See Resp’t Ex. 1, at 40
(Restatement, §1.2); see also Fla. Stat. §736.0603(1) (“While a trust is revocable, the
duties of the trustee are owed exclusively to the settlor.”); Hilgendorf v. Est. of Coleman,
201 So. 3d 1262, 1264-65 (Fla. Dist. Ct. App. 2016); Brundage v. Bank of Am., 996 So.
2d 877, 882 (Fla. Dist. Ct. App. 2008) (“[D]uring the settlor/beneficiary’s lifetime, a
trustee owes a fiduciary duty to the settlor/beneficiary and not the remainder
beneficiaries, who not only have no vested interest but whose contingent interest may be
divested by the settlor prior to her death.”).
31
Trial Tr. 70:12-71:7.
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Trust information during discovery.32 Because the requested remedy would
provide no additional benefit beyond what was obtained through discovery, I
recommend that the Court deny the requested relief of an accounting. 33
B. Setoffs from John’s Share of the Trust
In the Petition, John alleges that Martha and Mark made unequal
distributions to him out of the Trust.34 At trial, evidence was presented about two
transactions that were set off against John’s share of the Trust and led to an
unequal distribution among beneficiaries – first, a $211,561.00 loan assigned to the
Trust and, second, an adjustment related to an $100,000.00 advancement. I
address each in turn.
1. The $211,565.00 Loan Assigned to the Trust
32
Trial Tr. 65:19-66:2; see also D.I. 6; D.I. 10; D.I. 12. Although John testified that his
accountant was still lacking some information, he did not identify the accountant nor the
missing information, and the accountant did not testify. See Trial Tr. 92:9-17. In
contrast, Martha and Mark’s attorney represented to the Court that those documents were
produced during discovery. See id. 89:2-11. Considering the evidence as a whole, I am
persuaded that the trust information was produced in discovery. See D.I. 6; D.I. 12.
33
See N. River Ins. Co. v. Mine Safety Appliances Co., 105 A.3d 369, 385 (Del. 2014)
(where a remedy sought would be useless, equity will not award the remedy because
“equity will not do a useless thing”); Hendry v. Hendry, 2008 WL 484019, at *10 n. 89
(Del. Ch. May 30, 2006) (suggesting that, given the availability and liberal allowance of
modern discovery, a further accounting remedy would be unnecessary); see also Fla.
Gaming Corp. of Del. v. Am. Jai-Alai, Inc., 673 So.2d 523, 524 (Fla. Dist. Ct. App. 1996)
(holding that discovery of financial information in an accounting case was proper).
34
D.I. 1, ¶ 7.
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John executed a note (“Note”), dated November 1, 2006, in which he
promised to repay monies loaned to him by Settlor and/or Father, along with
interest at 5% per year.35 It appears that Settlor or Father gave John $3,500.00 per
month between November 2006 and April 2008 and $2,600.00 per month from
May 2008 until about January 2011 under the Note.36 John promised to pay the
35
D.I. 4, ¶ 4; Resp’t Ex. 3. Unlike the Trust, the Note does not state which state’s law
governs it. I turn to Delaware’s conflict of laws principles. “Delaware follows the
Second Restatement’s ‘most significant relationship’ analysis when considering choice of
law in contract disputes.” Certain Underwriters at Lloyds, London v. Chemtura Corp.,
160 A.3d 457, 464 (Del. 2017). For contracts, the Court will assess five factors in
determining which state has the most significant relationship: (1) the place of contracting;
(2) the place of negotiation of the contract; (3) the place of performance; (4) the location
of the subject matter of the contract, and (5) the domicile, residence, nationality, place of
incorporation and place of business of the parties. See Restatement (Second) of Conflicts
of Laws §188 (1971). Applying these factors, I consider that the Note was executed in
Fenwick Island, Delaware, see Resp’t Ex. 3, and the underlying agreement has largely
been performed in Delaware. See, e.g., D.I. 4, Ex. A. Therefore, I apply Delaware law
related to the Note.
John argues that the Note cannot be enforced against him because it was not
notarized and was not signed by Settlor or Father. Tr. 85:22-86:8. Delaware’s Statute of
Frauds only requires that a writing memorializing a contract be signed by the person
against whom enforcement is sought. 6 Del. C. §2714(a). Therefore, the Note can be
enforced against him. John further asserts that the signature was not his, contending,
alternatively, that he was not capable for medical reasons of signing the Note in the fall
of 2006, or that he would not have signed the Note without it being notarized. Tr. 93:10-
14; id. 40:1-8. To the extent that John contends that the signature was forged, John bears
the burden of proof. See Clymer v. DeGirolano, 2021 WL 2181377, at *4 (Del. Ch. May
27, 2021). He did not present any evidence to show a forgery or that the Note is invalid.
Comparing the signature on the Note and John’s signature in a recent court filing, I note
both signatures contain distinctive “J”s and I find them to be sufficiently similar to
conclude that John has not met his burden to show that the Note was a forgery. Compare
Resp’t Ex. 3 with D.I. 29; see also D.R.E. 901(b)(3) (providing that a writing and
signature may be authenticated through a comparison made by the finder of fact).
36
Resp’t Ex. 3; see also Trial Tr. 41:20-24.
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loan (principal and interest) back in a balloon payment at (1) the death of both
Settlor and Father “with the unpaid balance being deducted from the share of
[John’s] estate under the Will and or Trust of the last of the Lenders [Settlor or
Father] to die,” or (2) when John returned to gainful employment. 37 It is
undisputed that John received the money, and John produced that he paid Settlor or
Father back for the loan.38 Settlor assigned the Note to the Trust on June 3, 2010.39
When Martha and Mark were administering the Trust, they set off the amount of
principal and interest due on the Note against John’s beneficiary interest in the
Trust.40
37
Resp’t Ex. 3.
38
See Trial Tr. 40:9-11; id. 45:23-24; id. 46:12-14. John contends that the monies he
received were not a loan but repayment for monies owed to him by Father and,
alternatively, that Settlor wanted the loan changed so that the monies he received were
for taking care of her. First, John claims that Father owed him for using John’s academic
trust fund for other purposes. Id. 23:18-20; id. 26:19-24; id. 37:8-9. But, he admitted that
he has no documentation to support his claim. Id. 29:1-3; id. 32:7-11. And, neither
Martha nor Mark knew anything about an academic trust for John. Id. 64:15-20; id.
75:17-22. I find John’s testimony unpersuasive. Second, John asserts that, in April or
May 2008, Settlor made an oral modification to the loan so that the amounts paid
represented payments for services rendered to her for her care. Id. 33:9-12; id. 41:18-
42:2. I find John’s self-serving testimony to be unconvincing and rely on the evidence
showing that Settlor assigned the Note (unmodified) to the Trust in 2010 – two years
after the modification allegedly occurred. See Resp’t Ex. 4.; see also D.I. 4, Ex. A (March
9, 2011 letter from Raymond E. Tomasetti, Jr. and Settlor (“Tomasetti Letter”) regarding
“Loans for John J. Foster, Jr.,” discussing the Note and the amount due from John under
the Note as of January 31, 2011). I conclude that John has not proven monies paid to him
were not under the Note, or that the Note was subsequently modified to eliminate his
repayment obligation.
39
Resp’t Ex. 4.
40
Trial Tr. 59:11-60:8; id. 67:16-68:4; Resp’t Ex. 2.
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I consider whether, under Florida law, Martha and Mark were entitled to set
off a beneficiary’s debt to the Trust against that beneficiary’s share of the Trust.
“If the trustee holds a claim against the beneficiary he has a duty to collect it, and
to use the beneficiary’s interest in the trust as a source of collection.”41 Therefore,
Martha and Mark were entitled to set off the loan debt that John owed to the Trust
under the Note against John’s share as a Trust beneficiary. Indeed, the Note shows
that deducting the “unpaid balance” of the loan from John’s share was explicitly
agreed to by the parties.42
2. $100,000.00 Advancement
The Trust provides that, at Settlor’s death, the remaining Trust assets will be
split among Settlor’s children, with John receiving a one-sixth share, subject to an
adjustment. The adjustment provision for John’s share provides:
(1) Adjustment to Share of John J. Foster, Jr. For purposes of
this subsection, the term “adjustment amount” shall refer to (i) the
sum of One Hundred Thousand Dollars ($100,000.00), less (ii)
aggregate transfers relating thereto from JOHN J. FOSTER, JR. to
[Settlor] and/or [Father] as of the date of the survivor of [Settlor or
Father], with the difference between (i) and (ii) then being divided by
41
Bogert Trusts & Trustees § 592 (2d ed. 1980). See also Cnty. Nat’l Bank & Tr. Co. of
Santa Barbara, 288 P.2d 880 (Cal. App. 1955); Sec. Tr. Co. v. Boyd, 32 A.2d 779 (Del.
Ch. 1943); Sheridan v. Riley, 32 A.2d 93 (N.J. Ch. 1943). While I found no Florida
caselaw addressing this point, this represents the majority view. “A trustee who has a
duty to pay or distribute property to a beneficiary should be able to set off a sum due (1) a
debt of the beneficiary to a settlor, [or] (2) a liability of the beneficiary to a trustee in
their representative capacity …” Bogert Trust & Trustees § 814 (3d ed. 2020).
42
Resp’t Ex. 3, §3(A)(1).
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two (2). … The adjustment amount shall be subtracted from the share
created for JOHN J. FOSTER, JR., and allocated equally among the
shares created in Subsections (a) through (f) of this Section entitled
“Division Upon Death”, including the share created for JOHN J.
FOSTER, JR.
(“Adjustment Provision”). 43 Martha and Mark believed that the Adjustment
Provision addressed a loan, or monies provided in advance of Settlor’s death, by
Settlor to John.44 Similar to his argument regarding funds paid under the Note,
John asserts that the $100,000.00 was not an advancement but compensation for
Father’s improper use of funds from a separate trust.45 Unlike the Note, however,
there is no written documentation related to this $100,000.00.46 Considering the
evidence as a whole, I find that the $100,000.00 was likely an advancement but,
regardless, the Trust provides for adjusting John’s share based on that
43
Resp’t Ex. 1, at 85 (Fourth Amendment, §9.3(a)(1)).
44
See Resp’t Ex. 2; D. I. 4, ¶¶ 4, 7. Martha testified that she believed the reason for the
Adjustment Provision was that John had already received the $100,000.00, representing
the minimum amount the Settlor/Father wanted all of the children to receive from the
Trust, before Settlor’s death. Trial Tr. 54:20-55:5; see also D.I. 4. Ex. A (Tomasetti
Letter discussing that the Trust acknowledges “the $100,000 that [Settlor] had previously
given to [John]”).
45
See Trial Tr. 25:10-12; id. 29:10-31:10; id. 38:3-9. John repeatedly acknowledged that
he had no documentation of any debts that Father owed him. See, e.g., id. 33:16-34:1.
Further, there was some confusion in John’s testimony as to whether Father had paid
back the funds he owed him earlier. Trial Tr. 38:8-39:13. Martha and Mark disclaimed
knowledge of any academic trust for John or any debts that Father owed John. See id.
64:15-20; id. 65:12-16; id. 75:17-76:1. I do not credit John’s testimony because it was
self-serving and not corroborated by other evidence. And, the evidence provides no basis
to understand the nature or amount of the alleged debt and whether it was enforceable.
See supra note 38.
46
Cf. Resp’t Ex. 3.
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$100,000.00.47 Martha testified that, in determining John’s share from the Trust,
she and Mark distributed the Trust funds according to the Trust’s terms as her
“parents wanted [them] to do,” and they argue that they complied with the
Adjustment Provision in setting off the $100,000.00 advancement against John’s
beneficiary share so that John’s share is equal “in a situation where he got [some
of] his before his parents died.”48
There is an issue, however, with Martha and Mark’s interpretation of the
Adjustment Provision regarding the calculation of John’s adjustment amount. 49
Under Florida law, “the polestar of trust interpretation is the settlor’s intent.”50 “If
the language in the trust is unambiguous, the settlor’s intent as expressed therein
controls and the court cannot rely on extrinsic evidence.”51 “To determine the
settlor’s intent, the court should construe the instrument as a whole, taking into
account the general dispositional scheme.”52
47
See Resp’t Ex. 1, at 85 (Fourth Amendment, §9.3(a)(1)).
48
See Trial Tr. 66:3-7; id. 66:18-24; id. 89:12-21; id. 90:13-14.
49
Although John did not bring up this issue specifically, he seeks to have his share of the
Trust equalized and Martha and Mark effectively raised it when they testified that they
had properly administered the Trust. Trial Tr. 66:3-7; id. 90:14-18; see also D.I. 1, at 2.
50
Vigliani v. Bank of Am., N.A., 189 So.3d 214, 219 (Fla. Dist. Ct. App. 2016) (cleaned
up).
51
Id. (cleaned up).
52
Id. (cleaned up).
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The Adjustment Provision provides that the “adjustment amount” should be
subtracted from John’s share, divided by six, and one-sixth of the adjustment
amount added to each beneficiaries’ share, including into John’s.53 The
“adjustment amount” is $100,000.00, less any amount that John paid to Settlor or
Father during their lifetimes, divided by two.54 No evidence was presented that
John ever transferred any of the $100,000.00 to Settlor or Father during their
lifetimes. So, the “adjustment amount” should have been $50,000.00 ($100,000.00
divided by two), and $50,000.00 should have been deducted from John’s share,
divided into six, and $8,333.33 ($50,000.00 divided by six) should have been
added into each beneficiaries’ share, including John’s. But this was not the process
followed by Martha and Mark – they set off the entire $100,000.00 against John’s
interest in the Trust.55
In their administration of the Trust, Martha and Mark included the full
$100,000.00 from John and $20,000.00 from Patricia as Trust assets for a total of
$3,816,000.00, and a $636,000.00 distribution from the Trust. 56 Applying the
53
See supra note 43 and accompanying text.
54
Id.
55
Resp’t Ex. 2.
56
Id. The Trust provides for the same calculation to determine Patricia’s adjustment
amount for her $20,000.00 as it did for John’s $100,000.00. Compare Resp’t Ex. 1, at 85
(Fourth Amendment, §9.3(a)(1)) with id., at 85-86 (Fourth Amendment, §9.3(c)(1)).
$636,000.00 represents a one-sixth share of $3,816,000.00. The additional $219,000.00
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Adjustment Provision, they should have included only the adjustment amounts – or
$50,000.00 from John and $10,000.00 from Patricia – making the total Trust assets
$3,756,000.00, and $626,000.00 a one-sixth share of the Trust assets.57 And, under
the Adjustment Provision, they should have deducted $50,000.00 from John’s
$626,000.00 share, and added $8,333.33 for his one-sixth share of his adjustment
amount and another $1,666.66 for his one-sixth share of Patricia’s adjustment
amount, or $586,000.00 for John.58 Then, as Martha and Mark did, John’s
$211,561.00 loan memorialized in the Note would be set off from John’s share,
which results in John being entitled to a distribution of $374,439.00 from the
Trust.59 John received $324,439.00 from the Trust.60 Therefore, John should
receive an additional $50,000.00 in distributions from the trustees.
that each beneficiary received from Father’s trust is not addressed in this Report. See
Resp’t Ex. 2.
57
Since Martha and Mark included the full $20,000.00 from Patricia in Trust assets, I
assume that Patricia did not compensate Settlor/Father for any of the $20,000.00 and her
adjustment amount would be $10,000.00 ($20,000.00 divided by 2), and $1,666.66 (1/6th
of the adjustment amount) would be added into each beneficiary’s share. However, any
change in the distribution related to the incorrect adjustment amount calculated for
Patricia’s share is not addressed here, since she has filed no claim in this Court regarding
her Trust distribution.
58
I rounded up the total of $585,999.99.
59
See supra notes 35-42 and accompanying text.
60
Ex. 2; Ex. 6; Ex. 8; Ex. 9. At trial, Martha and Mark’s Counsel indicated that John
actually received an additional $300.00. Trial Tr. 68:21-24; see Resp’t Ex. 6. I decline to
include that $300.00, which represented 1/6 of the cash found, since there is no proof that
the cash found was included as a Trust asset for distribution purposes. See Resp’t Ex. 2.
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Under Florida law, as trustees, Martha and Mark are required to “administer
the trust in good faith, in accordance with its terms and purposes and the interests
of the beneficiaries …”61 They “shall administer the trust as a prudent person
would, by considering the purposes, terms, distribution requirements, and other
circumstances of the trust. In satisfying this standard, the trustee shall
exercise reasonable care, skill, and caution.”62 The Trust provides that trustees
shall act in a “fiduciary capacity,” and “shall not have the power, either directly or
indirectly, to enlarge or shift any of the interests of any beneficiary in the
[Trust].”63
Martha and Mark, in taking on the role of trustees of the Trust, were
required to fulfill the terms of the Trust in a prudent manner – with reasonable
care, skill and caution. I find that they misinterpreted the Trust and, in doing so,
failed to properly distribute John’s share of the Trust funds in violation of the
Trust’s terms. Their actions do not reflect the “diligence and care which a prudent
man ordinarily uses in his own concerns”64 and represent a breach of their duties as
fiduciaries. Under the Trust, they did not have the power to shift John’s interests
61
Fla. Stat. §736.0801.
62
Fla. Stat. §736.0804.
63
Resp’t Ex. 1, at 52 (Restatement, §10.21).
64
Thomas v. Carlton, 143 So. 780, 784 (Fla. 1932) (“trustees are held merely to that
diligence and care which a prudent man ordinarily uses in his own concerns”).
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In the Matter of the Doris J. Foster Inter Vivos Declaration of Trust
C.A. No. 2018-0589-PWG
November 21, 2022
to other beneficiaries in contravention of the Trust terms. Accordingly, they are
liable for restoring John to the correct value of his share as determined by the
Trust.65 Given that the Trust distributions were made and the Trust was wound up
by the end of 2016, it is unlikely that undistributed Trust funds remain to
compensate John for the $50,000.00 shortfall. If no Trust assets remain, Florida
law allows a court to impose a constructive trust over wrongfully disposed of trust
property to the extent that the trust property is traceable, or to order other
appropriate relief.66 I recommend that the Court impose a remedy of a constructive
trust in the amount of $50,000.00 upon prior Trust distributions Martha and Mark
made to themselves to be held for John’s benefit.67
65
Fla. Stat. §736.1002 (if a trustee commits a breach of trust, they are liable for “[t]he
amount required to restore the value of the … trust distributions to what they would have
been if the breach had not occurred”).
66
Fla. Stat. §736.1001(2)(i),(j); see also id. §736.1018.
67
If a constructive trust cannot be established from prior Trust distributions to Martha
and Mark, the Court shall revisit the remedy and consider other equitable remedies to
make John whole. Further, in the Petition, John sought attorneys’ fees. See D.I. 1, at 2.
This request was not renewed at trial and John was no longer represented by counsel.
Delaware follows the American Rule, which provides that each party is normally
responsible for their own attorneys’ fees, whatever the outcome of the litigation, absent
express statutory language to the contrary or an equitable doctrine exception, such as the
bad faith exception. See Shawe v. Elting, 157 A.3d 142, 149 (Del. 2017) (citation
omitted); see also ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554, 558 (Del.
2014). Delaware courts have awarded attorneys’ fees for bad faith when “parties have
unnecessarily prolonged or delayed litigation, falsified records or knowingly asserted
frivolous claims.” Kaung v. Cole Nat. Corp., 884 A.2d 500, 506 (Del. 2005) (quoting
Johnston v. Arbitrium (Cayman Islands) Handels AG, 720 A.2d 542, 546 (Del. 1998))
(internal quotation marks omitted). “The bad faith exception is applied in ‘extraordinary
circumstances’ as a tool to deter abusive litigation and to protect the integrity of the
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In the Matter of the Doris J. Foster Inter Vivos Declaration of Trust
C.A. No. 2018-0589-PWG
November 21, 2022
III. Conclusion
For the reasons set forth above, I recommend that the Court enter judgment
in John J. Foster, Jr.’s favor as to his claim for an equal distribution of the Trust
assets and that Martha and Mark be directed to distribute an additional $50,000.00
in Trust funds to John. If insufficient Trust funds exist, a constructive trust in that
amount shall be imposed upon prior distributions Martha and Mark made to
themselves from Trust funds. I recommend that the Court enter judgment in
Martha and Mark’s favor as to the remainder of John’s claims. This is a Master’s
Final Report and exceptions may be taken under Court of Chancery Rule 144.
/s/ Patricia W. Griffin
Master Patricia W. Griffin
judicial process.” Montgomery Cellular Holding Co. v. Dobler, 880 A.2d 206, 227 (Del.
2005) (citation omitted). Even if John has incurred attorneys’ fees in this litigation, I find
no basis to justify fee shifting in this case and that each party should bear their own fees.
17