Stephanie G. Reed v. Russell Greene

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
PATRICIA W. GRIFFIN CHANCERY COURTHOUSE
MASTER IN CHANCERY 34 The Circle
GEORGETOWN, DELAWARE 19947
Final Report: December 8, 2020
Date Submitted: November 23, 2020
Peter K. Schaeffer, Jr., Esquire
Avenue Law
1073 South Governors Avenue
Dover, Delaware19904
Barbara Snapp Danberg, Esquire
Baird Mandalas Brockstedt, LLC
Little Falls Centre One
2711 Centerville Road, Suite 401
Wilmington, Delaware 19808
RE: Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
Dear Counsel:
Pending before me is a petition to partition an investment cash account filed
by a sister against her brother, co-owners of the account. They owned the account
with their mother, as joint tenants with right of survivorship, until their mother’s
death. The sister seeks an equal split of the proceeds, claiming that the brother’s
request to offset expenditures he made related to their mother’s estate against her
share of the proceeds is barred by laches. I recommend the Court order the
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
account partitioned and also grant the brother’s request to offset the sister’s share
of the partition proceeds for his expenditures. This is a final report.
I. Background
Gladys Greene (“Decedent”) jointly owned a Bank of America Merrill
Lynch cash account (“Account”) with her daughter, Petitioner Stephanie Reed
(“Reed”), and her son, Respondent Russell Greene (“Greene”), as joint tenants
with right of survivorship, until her death on March 1, 2009. 1 During her lifetime,
Decedent’s income went into either the Account or a checking account (“Checking
Account”) that Decedent held jointly with Greene. 2 Decedent paid her bills from
the Checking Account, funneling additional money from the Account into the
Checking Account, as needed.3
Reed and Greene served as co-executors, and sole beneficiaries, of the
Decedent’s estate (“Estate”). The Estate Inventory filed with the Register of Wills
(“ROW”) lists the Account as jointly owned property with Reed and Greene, with
a value of $57,401.53, and the Checking Account as jointly owned property with
Greene, valued at $3,781.53, as of the date of Decedent’s death.4 Estate bills were
1
Docket Item (“D.I.”) 1, ¶ 6.
2
Trial Tr. 23:7-12; Trial Tr. 25:16-26:10; Trial Tr. 46:10-23.
3
Trial Tr. 26:21-23; Trial Tr. 47:1-2; Trial Tr. 52:2-4.
4
In the Matter of Gladys I. Greene, 19403, D.I. 2. I take judicial notice of Kent County
Register of Wills filings for the estate of Gladys I. Greene, which include an inventory,
filed on November 9, 2009, and signed by Reed on October 26, 2009, and Greene on
2
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
handled similarly to Decedent’s finances – bills were paid from the Checking
Account, with additional monies transferred from the Account to the Checking
Account, as needed.5 The evidence shows an invoice from Harold W. T. Purnell,
II, Estate attorney to the Estate, dated June 8, 2010, seeking a payment of
$20,265.70 in attorney’s fees and costs (“Fees”). 6 Greene testified that he was
advised on June 29, 2010 by the Estate attorney’s law firm that the Fees had to be
paid immediately so that the First and Final Account could be filed on a timely
basis. 7 Greene testified that he contacted Reed that day, who told him to pay it. 8
But, since there were not sufficient funds in the Checking Account, and Reed’s
consent was required to take a distribution from the Account and she was
unavailable, he paid $20,265.70 for the Fees, and the $30.00 ROW filing fee, from
his personal checking account. 9 Greene further testified that he drove to the
November 4, 2009. See Arot v. Lardani, 2018 WL 5430297, at *1, n. 6 (Del. Ch. Oct. 29,
2018) (“Because the Register of Wills is a Clerk of the Court of Chancery, filings with
the Register of Wills are subject to judicial notice.”) (citations omitted); State v.
Falkowski, 2001 WL 1448487, at *1, n. 1 (Del. Super. Oct. 2, 2001).
5
Trial Tr. 17:10-16; Trial Tr. 21:21-22:1; Trial Tr. 32:24-33:21; Trial Tr. 48:17-20.
6
D.I. 12, Ex. A.
7
Trial Tr. 16:21-17:9; Trial Tr. 39:6-40:1.
8
Trial Tr. 16:16-20; Trial Tr. 37:23-38:13.
9
Trial Tr. 17:17-18:6; Trial Tr. 19:5-7; Trial Tr. 22:7-12. See Resp’s Trial Ex. 1 (copies
of checks from Greene’s personal account – one, dated June 29, 2010 and made out to the
Estate attorney’s law firm in the amount of $20,265.70, and another, dated June 30, 2010
and made out to the ROW for $30.00). Also, the Estate’s ROW file includes a June 29,
2010 email sent by Reed to ROW requesting a 30-day extension to file the Estate
3
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
attorney’s office to deliver the checks.10 The Estate’s First and Final Account was
filed with ROW on July 6, 2010, and detailed an Estate expense of $20,000.00 for
attorneys’ fees. 11 The Estate was closed on July 14, 2010.12
It appears Reed and Greene have a fractious relationship and have not
spoken to each other for many years. 13 Greene asserts that they both owed the
Fees and he believed he would be reimbursed from the Account for one-half of the
Fees when the Account was ultimately divided.14 Reed testified that she assumed
the Fees were paid out of the Estate and, specifically, from funds in the Account.15
On January 28, 2020, Reed filed a petition (“Petition”) seeking to partition
the Account she co-owned with Greene.16 Reed asserts that Respondent Bank of
accounting, in which she states that the Estate attorney “will not file my final inventory
[sic] if we do not pay him his money and my brother [Greene] doesn’t send in his
paperwork,” and “Merrill Lynch needs till next Tuesday to cash some securities in so we
can pay him.” In the Matter of Gladys I. Greene, 19403, D.I. 2. She further states “[t]he
attorney talked to [Greene] today but I doubt that he will send in his paperwork . . . I am
at the beach until Friday, so that is also part of the problem in trying to get things
straightened out.” Id. The ROW Chief Deputy responded to Reed, by email dated June
30, 2010, that she had spoken with the attorney’s paralegal, who has all the paperwork,
and an “extension is not necessary.” Id.10
Trial Tr. 40:2-12.
11
In the Matter of Gladys I. Greene, 19403, D.I. 2.
12
Id.13
Trial Tr. 15:17-16:6; Trial Tr. 19:8-13: Trial Tr. 52:5-13.
14
Trial Tr. 18:14-24.
15
Trial Tr. 51:18-52:4. Testimony showed that it was Reed who selected the Estate
attorney. Trial Tr. 20:16-21:6; Trial Tr. 50:16-51:17.
16
D.I 1.
4
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
America Merrill Lynch (“Merrill Lynch”), the holder of the Account, refuses to
distribute the Account without a written agreement by the co-owners.17
Accordingly, Reed sought to have Merrill Lynch turn the corpus over to the Court
and for the Court to distribute the monies in the Account on a 50/50 basis to Reed
and Greene. She also asked that her attorney’s fees be assessed against Greene’s
share of partition proceeds.
On June 22, 2020, Greene responded to the Petition, denying that the
Account should be distributed on an equal basis and claiming that he should be
reimbursed from the monies in the Account for one-half of the Estate attorney’s
fees that he personally paid.18 Merrill Lynch was dismissed from the case on July
22, 2020, pursuant to a stipulated agreement.19 A hearing on the Petition was held
on November 23, 2020.
II. Analysis
The parties agree the Account should be partitioned but disagree on the
distribution of the proceeds. 20 Reed seeks an equal split of the proceeds, and
argues that laches precludes Greene’s claim for an offset against her share of the
17
Id., ¶ 7.
18
D.I. 12, ¶ 12.
19
Pursuant to the agreement, the Account remains frozen pending further order of the
Court and Merrill Lynch agreed to comply with all Court orders regarding disposition of
the Account. D.I. 16.
20
See Trial Tr. 10:10-12.
5
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
proceeds, since the Fees were Estate debts incurred prior to the Estate’s closure in
2010. 21 She relies on the analogous statute of limitations for a debt, 10 Del. C.
§8106, which limits debt claims to three years, and alleges it would be difficult to
validate the agreement about the expense after ten years. 22 And, she asserts the
Account has remained untouched since, at least, 2014.23
Greene responds that there are no specified time limitations for offsets or
contributions by the parties in partition actions.24 He claims expenditures on the
Fees benefitted both Reed and Greene, both parties waited to divide the Account,
and he understood he would be compensated for Reed’s share of the Fees when the
Account was eventually divided. 25
First, I consider the Court’s jurisdiction over this action to partition personal
property. “Equity courts have historically upheld the right of a tenant in common
to seek a partition of personal property.” 26 “An accounting is often an incident to a
suit for partition between joint tenants and tenants in common,” where “mutual
21
Trial Tr. 8:2-9:7.
22
Trial Tr. 57:21-59:21.
23
Trial Tr. 59:23-60:7.
24
Trial Tr. 63:8-17.
25
Trial Tr. 18:14-24; Trial Tr. 29:16-24; Trial Tr. 64:10-16.
26
Burkett v. Ward, 2012 WL 6764072, at *1 (Del. Ch. Dec. 19, 2012) (citing JLF, Inc. v.
NJE Aircraft Corp., 1988 WL 58274, at *2 (Del. Ch. June 2, 1988); see also Carradin v.
Carradin, 1980 WL 10015, at *3 (Del. Ch. Jan. 31, 1980) (“[a] court of equity is the
6
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
debts are alleged to exist.”27 Here, Reed and Greene own the Account as tenants in
common and I find the Court has equitable jurisdiction over a partition of the
Account, and any accounting addressing related debts.
The next issue is whether laches bars Greene’s claim seeking an offset of the
partition proceeds for one-half of the monies he expended on the Fees. The
“doctrine of laches protects defendants from prejudice by prohibiting the
unreasonably slow filing of equitable claims.” 28 Laches generally consists of three
elements: “first, knowledge by the claimant; second, unreasonable delay in
bringing the claim, and third, resulting prejudice to the defendant.” 29 Statutes of
limitations “are not controlling in equity” 30 and, “unlike a statute of limitations, the
equitable doctrine of laches does not prescribe a specific time period as
unreasonable.” 31 Although “filing after the expiration of the analogous limitations
period is presumptively an unreasonable delay for purposes of laches,” 32 a
determination on “unreasonable delay and prejudice . . . depend[s] upon the totality
proper tribunal for the partition of personal property whether the title is legal or
equitable”).
27
Carradin, 1980 WL 10015, at *3.
28
Quill v. Malizia, 2005 WL 578975, at *14 (Del. Ch. Mar. 4, 2005).
29
Reid v. Spazio, 970 A.2d 176, 182-83 (Del. 2009) (citation omitted); see also Levey v.
Brownstone Asset Mgmt., LP, 76 A.3d 764, 769 (Del. 2013); Fike v. Ruger, 752 A.2d
112, 114 (Del. 2000).
30
Reid, 970 A.2d at 183.
31
Whittington v. Dragon Grp., LLC, 991 A.2d 1, 9 (Del. 2009).
7
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
of the circumstances.” 33 And, unusual conditions or extraordinary circumstances
can justify not applying the analogous limitations period.34 The Court focuses on
“whether it is inequitable to permit a claim to be enforced, the touchstone of which
is inexcusable delay leading to an adverse change in the condition or relations of
the property or the parties.”35
Here, the evidence shows both parties knew that the Fees were a debt of the
Estate and acknowledged that debt when they signed off on the First and Final
Account and through other evidence. And, although the Account, as joint
property, was not an Estate asset for probate purposes, the parties’ arrangement
was that funds from the Account were used to pay Estate debts generally, and
would be used to pay for the Fees specifically. Greene and Reed both had
knowledge of the claim at the time it accrued. The key questions are whether
Greene’s delay in bringing his claim for reimbursement of one-half of the Fees was
unreasonable and also prejudicial to Reed.
It is undisputed that the claim regarding the Fees accrued approximately ten
years ago – when Greene paid the Fees, an Estate expense, personally – and that
Greene has not taken legal action against Reed regarding his claim since that time.
32
Levey, 76 A.3d at 769.
33
Hudak v. Procek, 806 A.2d 140, 153 (Del. 2002); see also Whittington, 991 A.2d at 9.
34
Levey, 76 A.3d at 770.
35
Reid v. Spazio, 970 A.2d 176, 183 (Del. 2009).
8
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
That length of time is presumptively unreasonable, however, the extraordinary
circumstances of this case justify a finding that Greene’s delay was not
unreasonable such that it caused prejudice to Reed. Reed knew about the Fees at
the time Greene paid them, and intended that Account funds would be used to pay
the Fees. It was Greene’s quick action in paying the Fees from his personal
account – rather than waiting to make arrangements to access funds in the Account
to pay the Fees – that prevented the Estate from being late in filing its accounting.
Greene’s actions benefitted both Reed and him, as co-executors and beneficiaries
of the Estate. Reed’s email to ROW confirms she was concerned about the
consequences if the accounting was filed late.36 There is no evidence of prejudice
to Reed by the delay, and the transactions at issue in this case have not “become so
obscured by time as to render the ascertainment of the exact facts impossible.” 37
The situation in this case is readily ascertainable based on the available evidence –
there are an invoice and checks from Greene showing the expenditures, and the
intended payment arrangement for the Fees is evident from testimony (including
Reed’s testimony that she believed the Estate would pay the Fees, and Reed’s
email to ROW).
36
See n. 9 supra.
37
Hudak, 806 A.2d at 158.
9
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
Here, Greene’s lengthy delay did not cause an adverse change in the
condition or relations of the property or the parties. Torpor occurred, but it was
mutual torpor – both parties knew of the debt and let the Account sit untouched for
years without dividing it. 38 I find Greene’s claim against Reed is not barred by
laches, since she knew that the Fees were a debt of the Estate and Estate expenses
were paid from the Account, and she benefitted equally from its payment by
Greene. Therefore, the cost of one-half of the Fees ($10,132.85) and one-half of
the ROW filing fee ($15.00), or $10,147.85, will be assessed against Reed’s one-
half share of the monies contained in the Account.
Finally, Reed asks that the attorney’s fees and costs she incurred in pursuing
this action be awarded to her from Greene’s share of the partition proceeds. 39 She
argues that Greene’s resistance in allowing distribution of the Account, despite her
reaching out to him through attorneys, justifies an award of her attorney’s fees.
“Under the American Rule and Delaware law, litigants are normally responsible
for paying their own litigation costs,” including attorneys’ fees.40 Equitable
38
Reed testified that she reached out to Greene through an attorney about the Account
between two and five years ago, and received no response. Trial Tr. 52:15-19. However,
she failed to take further action until filing this Petition.
39
D.I. 1.
40
Mahani v. Edix Media Grp., Inc., 935 A.2d 242, 245 (Del. 2007); see also ATP Tour,
Inc. v. Deutscher Tennis Bund, 91 A.3d 554, 558, n. 17 (Del. 2014); Korn v. New Castle
Cty., 2007 WL 2981939, at *2 (Del. Ch. Oct. 3, 2007).
10
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
exceptions to the American Rule include the bad faith exception,41 as well as the
“common fund doctrine” and the related “common benefit doctrine,” which are
based “on the equitable principle that those who have profited from a litigation
should share its costs.” 42 Here, I find no basis to shift Reed’s attorney’s fees and
costs onto Greene’s share of the partition proceeds. There is no evidence of bad
faith conduct by Greene during the litigation and his resistance reflects the dispute
regarding the division of the Account, not bad faith. Nor have Reed’s efforts, in
partitioning the Account, produced a benefit that would not otherwise have
existed. 43
III. Conclusion
Based upon the reasons set forth above, I recommend the Court partition the
Bank of America Merrill Lynch account, owned by Reed and Greene as joint
41
Attorney’s fees are awarded 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) (citation omitted); see also RBC Capital
Markets, LLC v. Jervis, 129 A.3d 816, 877 (Del. 2015) (citation omitted). And, “[t]he
bad faith exception is applied in ‘extraordinary circumstances’ as a tool to deter abusive
litigation and to protect the integrity of the judicial process.” Montgomery Cellular
Holding Co. v. Dobler, 880 A.2d 206, 227 (Del. 2005) (citation omitted).
42
Korn, 2007 WL 2981939, at *2 (citation omitted).
43
The common benefit doctrine “is designed to equitably spread the costs of producing a
benefit realized by a group, which benefit, absent the [Petitioner’s] efforts, would not
exist.” Moore v. Davis, 2011 WL 3890534, at *2 (Del. Ch. Aug. 29, 2011). In this case,
the partition served to divide the parties’ fractional ownership of an investment account,
so the exchange was “a wash.” See Estate of Proffitt v. Miles, 2012 WL 3542202, at *2
(Del. Ch. Aug. 4, 2012); Moore, 2011 WL 3890534, at *2.
11
Stephanie G. Reed v. Russell Greene
C.A. No. 2020-0052-PWG
December 8, 2020
tenants with right of survivorship, and offset Reed’s share of the partition proceeds
by one-half of Greene’s payment for Estate attorney’s fees and costs, and one-half
of the ROW filing fee. Therefore, Reed is entitled to receive one-half of the
amount of proceeds currently in that account 44 minus $10,147.85, and Greene is
entitled to receive one-half of the amount of the proceeds currently in that account
plus $10,147.85. I also recommend the Court deny Reed’s claim for her attorney’s
fees and costs in this litigation. The parties shall confer and submit an
implementing order within 20 days of this report becoming final. This is a final
report and exceptions may be filed pursuant to Court of Chancery Rule 144.
Respectfully yours,
/s/ Patricia W. Griffin
Master Patricia W. Griffin
44
The most recent account statement in evidence shows the account’s value was
$49,060.97 as of October 31, 2019. The parties will ascertain the current value of the
account and reflect that value in the implementing order they submit.
12