Lisa Anderson v. Randall Lee Hill

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
LISA ANDERSON,1 )
)
Plaintiff, )
)
v. ) C.A. No. 2018-0449-SEM
)
RANDALL LEE HILL, JOSHUA ABBOTT, )
CHRISTOPHER SHORT, )
TAYLOR L. GRANTHAM, and THE )
ESTATE OF CHARLES D. ANDERSON, )
BY AND THROUGH SHEILA L. WILKINS, )
EXECUTRIX, )
)
Defendants, )
)
AND )
)
JACKSON NATIONAL LIFE INSURANCE )
COMPANY, )
)
A Nominal Party. )
FINAL POST-TRIAL REPORT
Final Report: January 5, 2024
Date Submitted: August 17, 2023
Dean A. Campbell, DEAN A. CAMPBELL, P.A., Milton, Delaware; Counsel for
Plaintiff Lisa Anderson.
Gerry Gray, DOROSHOW PASQUALE KRAWITZ & BHAYA, Smyrna,
Delaware; Counsel for Defendant Randall Lee Hill.
MOLINA, M.
1
Anderson Enterprises Inc. was added as a co-plaintiff at the pre-trial conference. See
Docket Item (“D.I.”) 88. Anderson Enterprises Inc. is not, however, a party to the sole
remaining dispute; thus, I decline to amend the caption.
Tumultuous as it may be, this estate-related action presents one question—
who is the rightful owner of a 1937 Ford Coupe? In this post trial ruling, I find the
plaintiff is the rightful owner. The plaintiff and her late husband owned the vehicle
jointly by the entireties. The husband, thus, did not have authority to transfer
ownership without the plaintiff’s consent. Yet he attempted to do so, and title was
transferred to the husband’s cousin. Equity compels that such transaction be
rescinded, and title to the vehicle returned to the plaintiff, its rightful owner. But,
for the reasons explained herein, I recommend each side bear its own fees (except
those fees already shifted during discovery). Costs should be shifted to the plaintiff
as the prevailing party.
This is my final report.
I. BACKGROUND2
On December 29, 1987, Lisa Rauscher (later, Lisa Anderson then Lisa Craig,
2
The facts in this report reflect my findings based on the record developed at trial on March
15, 2023. See D.I. 94. I grant the evidence the weight and credibility I find it deserves.
Citations to the trial transcript are in the form “Tr. #.” Joint exhibits 1–19 are cited as
“JX#.” For clarity, the depositions admitted into evidence as JX16–18 are cited as “Last
Name Dep.” (Hill Dep., McGroerty Dep., and Anderson Dep., respectively).
The Defendant disputes the admissibility of testimony from Sheila Wilkins, the
Decedent’s daughter, regarding her discussions with her father. See Tr. 20:22–22:20. I
overruled the Defendant’s hearsay objection at trial and permitted the testimony under
Delaware Rule of Evidence 804(3); my ruling stands. The Defendant also objected to JX7;
I do not rely on JX7 in this report and, thus, the objection is moot.
the “Plaintiff”)3 and Charles Anderson (the “Decedent”) married.4 For much of their
relationship, the Plaintiff and the Decedent worked in tandem. But marital tensions
flared beginning in 2016 and continuing until the Decedent’s untimely death on May
6, 2018.5 After the Decedent’s death, the steps the Plaintiff and the Decedent took
reacting to those tensions came to light, complicating the administration of the
Decedent’s estate. This report addresses those tensions, the steps taken in response,
and the lingering issue that remains.
A. The Early Years
The Plaintiff and the Decedent “were both self-employed in their respective
businesses operated under the corporate name, Anderson Enterprises, Inc.”
(“AEI”).6 The Plaintiff worked as a beautician, the Decedent as an antique dealer.7
3
See Tr. 35:10–15, 96:20–97:5. At the pretrial conference, I granted the Plaintiff’s request
to add what is herein defined as AEI as a second plaintiff. See D.I. 88. That addition was,
however, primarily to address the life insurance dispute that has since been resolved. See
D.I. 92. Thus, I refer to the Plaintiff as the sole plaintiff prosecuting the remaining portion
of this action.
4
Tr. 36:5–6; D.I. 88 § III, ¶ 1; Anderson Dep. 6:9.
5
See D.I. 88 § III, ¶ 5.
6
D.I. 88 § III, ¶ 3. The Plaintiff was, however, the majority owner of AEI (owning 97% to
the Decedent’s 3%). Id. ¶ 4.
7
Tr. 37:23–38:4. The Plaintiff worked out of her parents’ home, in which she and the
Decedent resided beginning in 1999. Tr. 37:8–22. Although the Decedent held himself out
as owning an antique shop (see, e.g., McGroerty Dep. 13:15–14:24), the Plaintiff insists
that his “business” was more of a hobby and the antique shop at their property was not in
operation during their marriage. Tr. 40:15–42:14, 44:18–46:9, 107:2–9.
2
The Decedent’s business did not generate steady income, although the Decedent
would sell certain items when necessary to make ends meet. 8 The Decedent’s
primary financial contribution to the marital assets was his monthly social security.9
That income, along with all of the pair’s income, went into one of three jointly owned
bank accounts.10 The Decedent did not have any separate bank accounts and the
Plaintiff, generally, handled the couple’s finances.11
Diverse as some of their interests may be, the couple shared a fondness for
antique cars.12 They collected cars since the beginning of their relationship.13 All
their cars were typically stored in their pole barn garage or at a friend’s garage.14
Together, they owned several cars, including the 1937 Ford Coupe (the “Coupe”).15
The Plaintiff and the Decedent purchased the Coupe on or around May 1,
2007, as reflected in the title issued that date (the “Original Title”).16 They purchased
8
Tr. 41:6–10.
9
Tr. 42:12–14.
10
Tr. 42:15–43:6.
11
Tr. 58:3–7.
12
The Decedent enjoyed buying and selling vintage items; he owned a diverse collection
of taxidermy, clocks, exotic birds, and antique toys and automobiles. Tr. 40:15–41:5,
65:16–66:3.
13
Tr. 40:19–22.
14
Tr. 56:23–57:6.
15
Tr. 47:2–13.
16
Tr. 52:9–19, 55:5–11, 57:17–23. The Plaintiff testified that she believes they owned the
Coupe before May 2017, but she did not introduce an earlier title. See JX3.
3
it from Dave Hudson—a garage owner in Harbeson—for $15,000.17 The Plaintiff
believes the purchase money came from the couple selling several other cars, which
were jointly owned.18 After their purchase, the Coupe was registered as:
“ANDERSON CHARLES D &OR ANDERSON LISA B.”19 The Coupe was
“restricted for use only in club activities, exhibits, tours, and parades[,]” and not to
be “used for general transportation.”20 The Plaintiff and the Decedent used it as such;
occasionally driving it to and from car shows and fairgrounds, but never using it for
day-to-day transportation.21
Blue Ribbon Classic Auto Appraisal Services, LLC (the “Appraiser”)
appraised the Coupe on October 15, 2009.22 The Appraiser found the Coupe was in
good condition and valued it at $22,000.00.23
17
Tr. 52:9–19, 55:5–11, 57:17–23.
18
Tr. 55:12–18.
19
JX3–4. That designation was on all their vehicles except one, which was in the
Decedent’s sole name. Tr. 53:8–14.
20
JX4.
21
Tr. 53:15–54:15. But the Plaintiff testified that she would drive the Coupe around the
block to keep it in working condition. Tr. 234:17–235:6.
22
Tr. 234:17–235:6.
23
JX2.
4
B. The Turbulence24
In late 2016, the Decedent’s physical health declined. He suffered a stroke and
was diagnosed with diabetes and heart disease, among other ailments.25 The decline
was contemporaneous with (and perhaps exacerbated by) two life changes. The first
was his father’s death around October 2016.26 The Decedent’s loss was amplified
when he learned he was specifically written out of his father’s will.27 The second
life change was propelled by the Plaintiff—she wanted to downsize and retire, an
interest the Decedent did not share.28
In ill health and facing unwanted life changes, the Decedent’s final years were
turbulent.29 The Plaintiff testified candidly about the end of her relationship with
the Decedent. It is apparent that their once stable partnership dissolved before the
Decedent’s death. But, with the Decedent’s passing, I am left with only one side of
the story. Herein, I make no judgments on the reason for (or blame necessary to
24
The Defendant disputes that the marriage became turbulent in or around 2016. Tr.
192:13–18. But I found the Plaintiff’s testimony credible and supported by the Decedent’s
petition for divorce wherein he noted the couple had been separated “since 2016.” Tr. 67:2–
69:7; JX9.
25
Tr. 67:2–14.
26
Tr. 68:14–15.
27
Tr. 67:21–68:5.
28
Tr. 66:16–67:1.
29
Tr. 68:16–20.
5
understand) the relationship’s end, nor do I attempt to summarize every step in that
direction. Rather, I focus on those steps that I find relevant to the issue at hand.
C. The Sale of the Coupe
During the final tumultuous years, the Plaintiff recalls driving the Coupe to
the Apple Scrapple Festival in October 2017 (20 miles away from their home).30
Little did she know, though, that the Decedent was already in talks to sell the Coupe
to his cousin, Randall Lee Hill (the “Defendant”).
The Defendant is the Decedent’s younger cousin.31 He lived about 14 miles
away from the Decedent and, when the Decedent’s health declined, would drive the
Decedent to and from Lancaster, Pennsylvania to visit the Amish markets.32 During
one of their road trips, the Defendant and the Decedent started to discuss the
Defendant buying the Coupe.33
Like his cousin, the Defendant is an avid car collector.34 From visiting with
the Decedent and frequenting many of the same car shows, the Defendant was
familiar with, and always interested in, the Coupe.35 During their drives, sometime
30
Tr. 234:1–16.
31
Tr. 164:19–21, 165:8–10.
32
Tr. 164:22–165:1, 172:10–173:19.
33
Tr. 179:17–180:5.
34
See Tr. 169:19–20.
35
The Defendant testified that he never saw the Plaintiff drive the Coupe. Tr. 177:19–
178:6, 178:19–20. The Defendant also maintains that he asked the Decedent about buying
6
in 2017, the Defendant testified that he and the Decedent reached an agreement: the
Defendant would buy the Coupe for $12,000.00.36 The Defendant admitted that the
Plaintiff was unaware of the purported agreement; per the Defendant and the
Decedent’s attorney, the Decedent wanted to sell the Coupe and use the proceeds to
surprise the Plaintiff with a convertible.37
Assuming there was such an agreement, whether the Defendant did (or even
could) meet his end of the bargain is hotly contested. The Defendant testified that
he gave the Decedent $9,000.00, as his initial payment on the Coupe, in November
2017.38 But there is no record of such transaction, neither in the Defendant’s files
nor the Decedent’s.39 And the Defendant testified candidly that he was struggling
the Coupe on several occasions, even in front of the Plaintiff during a family cookout. Tr.
179:17–19, 177:3–11. The Defendant asserts that the Plaintiff did not object to the offer at
that time. Tr. 177:12–18. The Plaintiff denies this occurred. Tr. 235:7–14.
36
Per the Defendant, the Decedent agreed to “sell it to [the Defendant] for the same amount
that he paid for it.” Tr. 180:8–9. Per the Defendant, that price was $12,000.00; the Plaintiff
testified, however, that they purchased the Coupe for $15,000.00. Hill Dep. 16:3–5; Tr.
55:5–11, 176:19–22, 190:6–18.
37
Hill Dep. 22:23–23:1; McGroerty Dep. 29:11–15. The Plaintiff testified that, as a
hairdresser, she has no interest in a convertible. Tr. 235:18–236:6.
38
Tr. 184:23–185:4.
39
The only purported record is a handwritten note within JX12, to which the Plaintiff
objected. Because I do not rely on JX12 in this report, the objection is moot.
7
financially at that time.40 Nevertheless, the Defendant testified that he gave the
Decedent cash from his safe.41
On January 15, 2018, the Defendant testified that he went to the Decedent’s
house and paid the remaining $3,000.42 Per the Defendant, the Decedent
immediately retrieved the Original Title and signed it over to the Defendant.43 The
Original Title reflects as much: on the second page, the Original Title reflects a sale
to the Defendant, from the Decedent, on January 15, 2018 for $12,000.00.44 The
Defendant testified that he took the Original Title and stored it in his safe for
safekeeping.45
But the Defendant did not immediately take possession of the Coupe or work
to transfer title. As the Original Title reflects, the “Purchaser’s Application” section
was not submitted until March 6, 2018.46 The Defendant testified that he did not
40
The Defendant discovered that a family member wrote fraudulent checks from his
account, putting him in a financial hole. Tr. 201:22–204:13, 206:13–207:3. The Defendant
was also behind on his mortgage. See JX13.
41
Tr. 185:5–6, 189:19–190:8.
42
Tr. 190:9–18, 191:5–192:3. The order of these payments is reversed from the order
described in the Defendant’s answer wherein he averred: “The transaction was initiated in
November 2017 with a down payment of $3,000.00 and completed January 15, 2018 when
[the Defendant] made his final payment of $9,000.00[.]” D.I. 23 ¶23.
43
Tr. 191:14–18.
44
JX3.
45
Tr. 195:20–196:3; Hill Dep. 14:22–23, 18:5–9.
46
JX3.
8
sign his portion and work to transfer title until March 2018 because he believed he
needed to take the Coupe to be registered in person.47 But, in January, per the
Defendant, he did not have room for the Coupe.48 And the Decedent purportedly
agreed that the Defendant could leave the Coupe with the Decedent and pick it up
when he was ready—the keys would be waiting for him.49
D. The Family Court Proceedings
By March 2018, the marital tensions between the Plaintiff and the Decedent
were coming to a head. On March 5, 2018, the Plaintiff felt so threatened that she
filed for a protection from abuse order against the Decedent.50 The Delaware Family
Court, finding an immediate and present danger to the Plaintiff, issued an ex parte
protection from abuse order that same day (the “PFA”).51 The PFA was set to expire
March 15, 2018 and required the Decedent to (1) relinquish all firearms, (2) “not
threaten, molest, attack, harass or commit any other act of abuse against” the
Plaintiff, (3) to “stay 100 yards away from [the Plaintiff’s] person, residence and
workplace[,]” and (4) not to “contact or attempt to contact” the Plaintiff “in any
47
Tr. 195:10–19.
48
Tr. 192:19–24.
49
Tr. 194:13–195:6.
50
Tr. 71:9–24.
51
D.I. 88 § III, ¶ 6.
9
way[.]”52 Through the PFA, the Family Court granted “exclusive use and
possession” of the couple’s residence to the Plaintiff and set a full hearing for March
15, 2018.53
The PFA was immediately served on the Decedent. Per the Decedent’s
attorney, the Decedent was shocked when the police arrived at his home to serve
him.54 The Decedent denied the Plaintiff’s allegations and shared with his attorney
positive interactions he recalled having with the Plaintiff the night before.55
Nonetheless, the Decedent cooperated with law enforcement and left the marital
home.
While leaving, the Decedent advised the Defendant that he should pick up the
Coupe because the Decedent was being forced out of his home.56 The Defendant
quickly worked to get title transferred, effective March 7, 2018 and on March 7 or
8, 2018, went to pick up the Coupe.57 By that time, the Decedent had moved out,
and when the Defendant arrived, the Plaintiff would not allow the Defendant to take
52
JX8.
53
Id.
54
McGroerty Dep. 18:19–20.
55
Id. at 17:22–18:20.
56
Tr. 197:4–20.
57
Tr. 72:22–24; JX1.
10
the Coupe and police would not interfere to force her to do so.58 Without cooperation
or law enforcement support, the Defendant has not tried to physically obtain the
Coupe again.59
In response to the PFA, the Decedent also retained Michael F. McGroerty as
his counsel.60 Mr. McGroerty swiftly got to work understanding the marital dispute
and advising his client regarding the PFA.61 Mr. McGroerty also advised his client
to file for divorce to protect the marital assets.62 On March 8, 2018, the Decedent
took that advice and filed for divorce as a self-represented litigant.63 In his petition,
the Decedent averred that the couple had been separated “since 2016.”64 The
Decedent also alleged misconduct by the Plaintiff, accusing her of removing money
58
Tr. 18:4–6, 199:1–22. The Decedent had moved in with his formerly estranged daughter,
Sheila Wilkins. Tr. 18:4–6. While the Decedent lived with Ms. Wilkins, they discussed
the Coupe. Tr. 23:10–14. Ms. Wilkins recalled the Decedent telling her “he was selling
[the Coupe] to [the Defendant] and then if something happened to [the Decedent], [the
Defendant] was supposed to give [the Coupe] to the boys,” meaning Ms. Wilkins’ sons.
Tr. 23:17–19.
59
Tr. 200:9–12.
60
See McGroerty Dep. 7:2–7.
61
Id. at 9:19–10:14.
62
Id. at 13:7–23.
63
D.I. 88 § III, ¶ 7; McGroerty Dep. 19:18–20:6; JX9. This was not the first step by either
side to divide their estates. On August 22, 2017, the Plaintiff replaced the Decedent as the
beneficiary of her life insurance. D.I. 88 § III, ¶ 12. In response, the Decedent asked Mr.
McGroerty to draft a will for him, disinheriting the Plaintiff. McGroerty Dep. 21:2–5. See
also JX11.
64
JX9.
11
and property from a safe, savings account, and safe deposit box.65 In his petition, the
Decedent acknowledged that the PFA rendered him unable to contact the Plaintiff
or access their home.66
But the Decedent did not comply. Although his health continued to decline
and he was in and out of the hospital, the Decedent was accused of violating the PFA
multiple times.67 Mr. McGroerty recalls making two trips to Delmar Police
Department where the Decedent was arraigned for violating the PFA (on March 15,
2018 and April 5, 2018).68 The Plaintiff also testified to a disturbing pattern of
conduct that had her fleeing, staying in safe houses, and fearing for her life.69
But, with counsel at the table, the Decedent consented to extending the PFA
until October 19, 2018.70 The extension was granted by the Family Court “without
a finding of abuse[.]”71 The parties’ agreement included a process by which the
65
Id.
66
Id. After filing for divorce, on March 12, 2018, the Decedent replaced the Plaintiff as the
beneficiary of the Decedent’s life insurance with Jackson National Life Insurance. D.I. 88
§ III, ¶¶ 9–10; JX10.
67
Per Mr. McGroerty the Decedent was in the hospital on and off from around March 9,
2018 through March 28, 2018 for a “severe heart problem[.]” McGroerty Dep. 8:14–24,
11:1–13, 12:11–15.
68
McGroerty Dep. 51:3–10.
69
Tr. 73:10–74:8.
70
JX8.
71
Id.
12
marital home would be appraised, and its contents inventoried.72 The restrictions on
the Decedent and the Plaintiff’s sole occupancy of the home remained in place.73
The spouses were also able to agree on division of certain cash assets.74
Around February 2018, after consulting with her attorney, the Plaintiff took
$10,400.00 from one of the couple’s safes.75 Per Mr. McGroerty, “that money was
identified from the outset by [the Decedent] as the money he had received in
payment for” the Coupe from the Defendant.76 The Plaintiff contests that was the
source of funds and testified the cash was from her, “[o]r if [the couple] sold
something [they] would put it in there for a nest egg.”77 After conferring, the parties
agreed to spend those funds on an appraisal of their home and security devices to be
installed at the home during the transition period; the remainder was to be split
72
Id.
73
Id.
74
It appears from the Plaintiff’s deposition testimony that the couple also agreed on the
disposition of the Decedent’s exotic birds. Anderson Dep. 51:12–18.
75
Tr. 101:21–102:3. The Decedent, in his petition for divorce, valued the safe at
$11,000.00. JX33 at 3.
76
McGroerty Dep. 27:14–17.
77
Tr. 63:17–19. This testimony conflicts with the Plaintiff’s December 2019 deposition
where she testified that she thought the cash “came from [the Decedent’s] Dad’s death
insurance from DuPont.” Anderson Dep. 56:22–57:1. Upon removal she “didn’t know”
where the cash came from. Anderson Dep. 58:7–9. Yet, she remains “[v]ery confident”
that the cash was not from the Defendant. Anderson Dep. 81:9–11; Tr. 108:14–18, 114:9–
24, 139:22–140:18.
13
evenly.78 The Plaintiff returned the funds owed to the Decedent on or around April
10, 2018.79
E. The Decedent’s Death
After the PFA and title transfer, the Plaintiff moved out of the marital home
and into safe houses.80 But the Plaintiff kept an eye on the property through the
agreed-upon security cameras.
On May 6, 2018, while on her way to Assateague with friends, the Plaintiff
checked the home cameras and saw a distressing scene.81 Instead of a quiet house,
the Plaintiff unwittingly tuned into a house on fire and somebody trying to extinguish
it.82 Before she or her friends could call the authorities, they called her.83 The
Plaintiff was instructed by first responders to go to the Delmar Police Department
and, once at the station, she learned that the Decedent had intentionally set their
house on before taking his own life.84
With the Decedent’s death, the divorce action was rendered moot.85
78
See JX19.
79
Id.
80
Tr. 73:9–74:4.
81
Tr. 84:17–22.
82
Tr. 84:20–23.
83
Tr. 85:2–13.
84
Tr. 85:19–85:18; D.I. 88 § III, ¶ 5.
85
See D.I. 65.
14
F. The Court of Common Pleas Action
On May 15, 2018, nine (9) days after the Decedent’s death, the Defendant
filed an action against the Plaintiff in the Court of Common Pleas.86 The Defendant
alleged he purchased the Coupe for $12,000.00, which was paid in full by January
15, 2018, with title transferred March 7, 2018.87 He averred the Plaintiff received
the benefit of the purchase price yet refused to release the Coupe.88 Thus, the
Defendant sought replevin.89 That action has, since, been dismissed without
prejudice.90
G. Procedural Posture
On June 21, 2018, the Plaintiff initiated this action pleading seven (7) counts
against five (5) defendants, including the Defendant.91 Much ink has already been
spilled in prior rulings and I direct interested readers to the docket for a complete
posture. In short, Magistrate Griffin was able to narrow the issues in dispute before
her retirement.92 She also addressed discovery disputes and shifted certain fees in
86
JX6.
87
Id.
88
Id.
89
Id.
90
See D.I. 100.
91
D.I. 1.
92
See D.I. 38, 39, 66.
15
favor of the Plaintiff and against the Defendant in an “amount to be determined by
the Court.”93
On November 3, 2022, Chancellor McCormick reassigned this case to me and
the parties thereafter resolved nearly all of the remaining disputes.94 I held trial on
the final remaining dispute (the Coupe) on March 15, 2023.95 Following trial, the
parties submitted post-trial briefs and the Plaintiff moved for determination of the
amount of the previously awarded fees.96 Briefing was complete on August 17, 2023,
at which time I took this case under advisement.97
II. ANALYSIS
Tension and turmoil aside, the singular question before me is: who owns the
Coupe?98 The Plaintiff contends the Decedent’s purported sale of the Coupe
constituted equitable fraud, and she seeks an order rescinding the transaction. The
Defendant counters that the sale was valid, and that the Plaintiff already received her
share of the sale’s proceeds. Both parties also request fee-shifting.
93
D.I. 56. The Defendant did not file exceptions to Magistrate Griffin’s order.
94
D.I. 78.
95
D.I. 93, 94.
96
D.I. 100–102, 105–106. The Defendant has failed to respond to the fee motion, despite
sufficient time and opportunity to do so.
97
D.I. 106.
98
The parties’ pretrial stipulation included additional issues of law that remained to be
litigated. D.I. 88 § V. But at trial the parties confirmed this sole remaining issue. Tr. 4:14–
17. See also D.I. 100–102, 105–106.
16
I first address equitable fraud. Finding the transaction amounts to equitable
fraud, I then turn to the remedy therefor and recommend rescission, without
restitution. I decline, however, to declare either side a bad faith litigant and
recommend only costs and the discovery fees ordered by Magistrate Griffin be
shifted in the Plaintiff’s favor.
A. The Decedent’s transfer of the Coupe amounts to equitable fraud.
Throughout this action the Plaintiff has proffered various arguments in
support of her count for equitable rescission. Post-trial, she relies exclusively on
one: equitable fraud.99 “Equitable fraud is the Chancery analog to common-law
fraud.”100 It requires proof of all the elements of common-law fraud minus scienter
and plus a special relationship between the fraudulent actor and the aggrieved
party.101 Thus, to prevail on her claim of equitable fraud, the Plaintiff needed to
prove by a preponderance of the evidence: (1) she and the Decedent were in a
fiduciary or confidential relationship, (2) the Decedent made a false representation,
(3) the Decedent intended to induce action by that false representation, (4) there was
99
Because the Plaintiff’s only remaining claim is for equitable fraud, the Defendant’s
motivations or intentions are irrelevant. My focus, instead, is on the Decedent’s conduct,
as the party in a confidential relationship with the Plaintiff, the aggrieved and complaining
party, who engaged in the transfer which is challenged in this action. My recommendation
herein that title should return to the Plaintiff should not be read as a finding of impropriety
by the Defendant.
100
Carpenter v. Liberty Mut. Ins. Co., 2023 WL 3454692, at *2 (Del. Ch. May 15, 2023).
101
Id.17
reasonable reliance on that false representation, and (5) the Plaintiff suffered
causally related damages.102
There is no reasonable dispute that the Plaintiff and the Decedent, as a married
couple, were in a fiduciary or confidential relationship when title to the Coupe was
transferred.103 Likewise, the Defendant concedes that the Coupe was marital
102
NetApp, Inc. v. Cinelli, 2023 WL 4925910, at *12 (Del. Ch.), judgment entered, 2023
WL 5609342 (Del. Ch. Aug. 29, 2023) (citations omitted).
103
The Defendant appears to argue that this Court is without jurisdiction to treat a marital
relationship as a “special relationship” for purposes of equitable fraud because of the
Family Court’s jurisdiction over the division of marital property. D.I. 105, p.20–21. This
argument is difficult to understand. Determining that a relationship is fiduciary is within
this Court’s core equitable jurisdiction. See Totta v. CCSB Fin. Corp., 2022 WL 1751741,
at *14 (Del. Ch.), judgment entered, (Del. Ch. July 18, 2022), aff’d, 302 A.3d 387 (Del.
2023) (“Fiduciary duties arise in equity and are a fundamental aspect of Delaware law.”).
And “[i]t has long been a principle of equity jurisprudence that the confidential relationship
between husband and wife may implicate the standards of a fiduciary.” Angelli v. Sherway,
560 A.2d 1028, 1036 (Del. 1989) (citations omitted). In determining whether a specific
marital relationship implicates fiduciary duties, this Court undertakes a factual inquiry into
the relationship at issue. Such analysis does not impede the Family Court’s jurisdiction.
The Defendant further argues that Angelli requires one spouse to have superiority
over the other for the finding of a “special relationship.” D.I. 105, p.21. The Defendant
misreads Angelli which explains “[t]he marital relationship entails fiduciary duties on the
part of each spouse for the benefit of the other, particularly where one spouse is in a position
of superiority to the other.” Bickling v. Bickling, 2000 WL 268306, at *4 (Del. Ch. Feb. 14,
2000) (citing Angelli, 560 A.2d at 1036). Superiority is not required. The Defendant’s
argument also ignores the uncontested record that the Plaintiff and the Decedent lived and
worked in tandem for most of their long marriage, treating all assets jointly and implicating
reciprocal duties requiring each to protect that marital property for the benefit of the other.
Finally, the Defendant argues that, because the couple’s marriage was unraveling,
their interests were no longer “perfectly aligned” and, as such, no fiduciary relationship
existed when the Coupe was transferred. In support, the Defendant cites Zebroski v.
Progressive Direct Ins. Co., 2014 WL 2156984, at *8 (Del. Ch. Apr. 30, 2014). This
argument must fail. Zebroski recognizes the unextraordinary proposition that “Delaware
courts . . . have been reluctant to impute the exacting principles of fiduciary relationships
18
property.104 There is also no dispute that (a) the Decedent intended the Defendant
to rely on the Decedent’s purported authority to transfer the Coupe, (b) the
Defendant reasonably relied on such purported authority,105 and (c) the Plaintiff
suffered causally related damages when title was transferred out of her name and
into the Defendant’s name.
That leaves (2)—whether the Decedent’s representations that he had authority
to transfer the Coupe were false. Put differently, the Plaintiff’s claim for equitable
fraud turns on whether the Decedent could validly transfer the Coupe without the
Plaintiff’s consent. I find he could not, thus, his representations to the contrary were
false and the transaction amounts to equitable fraud.106
“In Delaware, personal property may be held by the entireties and such an
estate prevents severance by the independent acts of one spouse.” 107 To determine
to those engaged in normal commercial dealings.” Id. It does not set a new standard where
a fiduciary relationship only exists where the parties’ interests are “perfectly aligned.”
104
D.I. 105 p.23 (“There is no dispute that [the Coupe] was marital property in this case.”).
105
“[J]ustifiable reliance requires that the representations relied upon involve matters
which a reasonable person would consider important in determining his course of action in
the transaction in question.” Craft v. Bariglio, 1984 WL 8207, at *8 (Del. Ch. Mar. 1,
1984). A lay person may justifiably rely on the representation that an “and/or” co-owner
has authority to sale or transfer title (notwithstanding common law to the contrary).
106
Equitable fraud further requires that the misrepresentation be material. Williams v. White
Oak Builders, Inc., 2006 WL 1668348, at *7 (Del. Ch. June 6, 2006). Purported authority
to transfer ownership is undoubtedly material to a sale contract.
107
William M. Young Co. v. Tri-Mar Assocs., Inc., 362 A.2d 214, 215 (Del. Super. 1976).
19
if property is held by the entireties, the couple’s intent controls, “not necessarily
language of the title of ownership.”108 But “the presence of both husband and wife
on [a] title is sufficient to create a presumption that [a] vehicle is held by the
entireties.”109 To overcome the presumption of joint ownership by the entireties, the
contesting party, here the Defendant, must present “relevant and probative evidence
to the contrary.”110
In Fischer, Chancellor Chandler demonstrated how to apply this presumption
and burden shift in the vehicular context.111 There, a married couple owned three
cars titled “AND/OR.” The Chancellor explained “[n]otwithstanding that th[e] ‘&
OR’ designation may be the standard designation of the Delaware Department of
Motor Vehicles, the presence of both husband and wife on the title is sufficient to
create a presumption that the vehicle is held by the entireties.”112 Thus, the
Chancellor applied the presumption and held the parties contesting ownership by the
entireties to their burden to prove otherwise.113
108
Id. at 216.
109
Fischer v. Fischer, 864 A.2d 98, 105 (Del. Ch.) (citing William M. Young Co., 362 A.2d
at 215–16; In re Giant Portland Cement Co., 21 A.2d 697, 704 (Del. Ch. 1941)), judgment
entered, 2005 WL 5783304 (Del. Ch. Mar. 8, 2005).
110
Fischer, 864 A.2d at 105.
111
Id.
112
Id.
113
They failed to meet it. Id. at 105–106.
20
The reasoning in In re Giant Portland Cement Co. is also instructive.114
Therein, a proxy was rejected because it was only signed by the husband, who jointly
owned the voting stock with his wife. The Chancellor held that “the same general
rules” applicable to real property held by the entireties “also apply to personal
property” held by the entireties.115 Although the stock certificate at issue merely
noted both co-owners and did not describe the ownership as by the entireties, the
Chancellor found the co-owners must be regarded as holding the stock by the
entireties.116 As such, “the stock in question could not be voted on a proxy signed
merely by [the husband]. Both husband and wife, but neither of them alone, were
stockholders in and members of the defendant corporation. Both were entitled to
exercise and enjoy jointly, but not otherwise, all of the usual rights and powers
incident to stock ownership[.]”117
The same reasoning applies here, where I follow the lead of Fischer.
Although the Coupe was titled “AND/OR,” both the Plaintiff and the Decedent, a
114
21 A.2d 697 (Del. Ch. 1941).
115
Id. at 703.
116
Id.
117
Id. at 704. The Court’s conclusion that the husband could not act alone to vote was
abrogated by 8 Del. C. § 217, which permits one co-owner of jointly owned stock, even
stock held by the entities, “to bind all co-owners with his vote unless the corporation has
received prior written notice to the contrary.” Hopkins v. Hopkins, 1982 WL 116991, at *3
(Del. Ch. Sept. 21, 1982). This modification of common law does not, however, undermine
the apt and persuasive reasoning in In re Giant.
21
married couple, were named on the Original Title, supporting the presumption that
the Coupe was held by the entireties. That presumption flips the burden to the
Defendant to prove otherwise. He failed to do so.
The Defendant argues, without citation, that “[t]he fact that the car was titled
‘and/or’ gave either [spouse] authority to sell the vehicle.”118 In re Giant and Fischer
instruct otherwise. The Defendant also appears to argue that, regardless of how the
sale was initially conducted, the cash division—accomplished by the couple during
the divorce proceeding—somehow cures the issue. It does not. The Decedent never
had sole authority to sell the Coupe and the Defendant conceded that the Plaintiff
was not aware of the transaction. There is also no evidence that the Plaintiff ratified,
acquiesced to, or waived her ability to contest the transaction. The Plaintiff has been
steadfast in her opposition to the transaction and never conceded, overtly or
implicitly, that the cash divided during the divorce proceeding came from, in whole
or part, the Defendant’s purported purchase. I find the Decedent’s purported transfer
of the Coupe to the Defendant amounts to equitable fraud.
B. The transfer of title to the Defendant should be rescinded.
To remedy the Decedent’s equitable fraud, the transfer to the Defendant
should be rescinded such that title to the Coupe is returned to the Plaintiff.
118
D.I. 105, p.23.
22
A defrauded party, generally, has two options. She “may elect to affirm the
challenged contract and seek money damages” in an action at law.119 Or, she “may
elect to disaffirm the contract and be restored to the status quo ante” through
equitable rescission.120 Here, the Plaintiff elected, and I find should prevail on,
option two.
“Equitable rescission . . . which is otherwise known as cancellation, is a form
of remedy in which, in addition to a judicial declaration that a contract is invalid and
a judicial award of money or property to restore plaintiff to [her] original condition
is made, further equitable relief is required.”121 “[T]he remedy of equitable recission
typically requires that the court cause an instrument, document, obligation or other
matter affecting plaintiff’s rights and/or liabilities to be set aside and annulled, thus
restoring plaintiff to [her] original position and reestablishing title or recovering
possession of property.”122
119
Clark v. Teeven Hldg. Co., Inc., 625 A.2d 869, 877 (Del. Ch. 1992) (citations omitted).
120
Id.121
E.I. Du Pont De Nemours & Co. v. HEM Rsch., Inc., 1989 WL 122053, at *3 (Del. Ch.
Oct. 13, 1989). Equitable rescission is distinct from rescission that may be sought in a
court of law. Id. Equity “is necessitated, for example, in circumstances in which if an
instrument, document, obligation, or other matter were not cancelled, plaintiff would be
exposed to liability to third parties not appearing in the action.” Id. For example, “[i]f
plaintiff is fraudulently induced to execute a note in favor of defendant, the only remedy
that is adequate for plaintiff is cancellation of the note to ensure that defendant does not
transfer the note to a bona fide purchaser, who could then recover from plaintiff under the
note.” Id. (citations omitted). Equity is necessary here.
122
Id.23
Here, equitable recission is appropriate and necessary to restore the status quo.
The Decedent’s unauthorized transfer of the Coupe to the Defendant fraudulently
deprived the Plaintiff of her interest therein. To remedy that harm and reestablish
the status quo, the transfer should be rescinded and title to the Coupe should be
returned to the Plaintiff.
The more difficult question is whether recission of title should be
accompanied by restitution to the Defendant. In Craft v. Bariglio, Chancellor Brown
emphasized “that rescission will not be granted unless the Court can and does, by its
decree, restore the parties substantially to the position which they occupied before
making the contract.”123 In doing so, this Court endeavors to equitably restore both
sides to the status quo.124
But, here, the Plaintiff argues the Defendant waived any argument for
restitution or, alternatively, failed to prove that he paid the Decedent any cognizable
funds for the Coupe such that restitution is warranted. In post-trial briefing, the
Defendant failed to address or request restitution, and failed to respond to the
Plaintiff’s waiver argument. Despite sufficient opportunity (and invitation) to do so,
123
Craft v. Bariglio, 1984 WL 8207, at *12.
124
Id.24
the Defendant has failed to move for restitution and I am forced to conclude that the
Defendant waived any argument therefor.125
It would, however, be inequitable to deny the Plaintiff rescission because of
the Defendant’s waiver. The Plaintiff has proven her claim of equitable fraud and
otherwise demonstrated the need for equitable rescission. That the Defendant has
failed to argue for reciprocal restitution should not bar such relief. Thus, I
recommend the transaction be rescinded, without restitution.
C. Attorneys’ fees should not be shifted under the bad-faith exception,
but discovery-related fees and costs should be shifted in the
Plaintiff’s favor.
Both sides seek fees under the bad faith exception to the American rule. The
Plaintiff also seeks a determination of the amount of fees owed to her from
Magistrate Griffin’s 2020 discovery ruling. I find no evidence of bad faith but
125
See, e.g., In re Mindbody, Inc., S’holder Litig., 2023 WL 7704774, at *6 (Del. Ch.),
judgment entered, 2023 WL 8235846 (Del. Ch. Nov. 27, 2023) (finding certain defendants
waived specific arguments “by failing to take minimal steps to preserve them”).
Waiver aside, the Defendant failed to present persuasive evidence that he paid any
specific funds to the Decedent to purchase the Coupe. The Defendant’s testimony was
difficult to believe considering the shifting payment schedule and documentation (and
admissions) that the Defendant was struggling financially at the time the large payments
were purportedly made. Absent waiver, the evidence does not support a finding that the
Defendant more likely than not paid $12,000.00 to the Decedent such that the Plaintiff
should be required to return such sum, or any portion of it, in connection with the rescission
of title recommended herein.
25
recommend that the Plaintiff be awarded costs in addition to the previously ordered
and herein determined discovery-related fees.
“Under the American Rule, litigants are expected to bear their own costs of
litigation absent some special circumstances that warrant a shifting of attorneys’
fees, which, in equity, may be awarded at the discretion of the court.”126 “The bad
faith exception to the American Rule applies in cases where the court finds litigation
to have been brought in bad faith or finds that a party conducted the litigation process
itself in bad faith, thereby unjustifiably increasing the costs of litigation.”127
“A party seeking to shift fees must satisfy the stringent evidentiary burden of
producing clear evidence of bad faith.”128 “To capture the sorts of vexatious
activities that the bad-faith exception is intended to address, this court employs the
‘glaring egregiousness’ standard.”129 Here, neither side has met the stringent burden
to prove glaringly egregious conduct.
The Plaintiff argues that the Defendant proceeded with this case
“[n]otwithstanding the overwhelming amount of evidence against him, without any
126
Beck v. Atl. Coast PLC, 868 A.2d 840, 850–51 (Del. Ch. 2005) (citations omitted).
127
Id.128
Myers v. Acad. Sec., Inc., 2023 WL 6380449, at *1 (Del. Ch. Oct. 2, 2023), adopted,
2023 WL 6846984 (Del. Ch. Oct. 16, 2023) (citations and quotation marks omitted).
129
Seidman v. Blue Foundry Bancorp, 2023 WL 4503948, at *6 (Del. Ch. July 7, 2023)
(citations omitted).
26
evidence or documentation whatsoever, and with overwhelming dis-favorable
caselaw” amounting to a waste of the parties’ and the Court’s time and resources.130
Although I herein recommend judgment in favor of the Plaintiff, I disagree that the
Defendant litigated in bad faith.
From the Defendant’s vantage, it is the Plaintiff who engaged in bad faith
litigation. Per the Defendant, the Plaintiff “needlessly drove up the costs of this
litigation beyond any reasonable proportion to the value of” the Coupe to construct
“an alternate reality to portray” the Decedent in a negative light.131 I herein find in
the Plaintiff’s favor and find no bad faith in her pursuant of the equitable relief
awarded herein.
All told neither side’s conduct was glaringly egregious. But, under Court of
Chancery Rule 54(d), “costs shall be allowed as of course to the prevailing party
unless the Court otherwise directs.” The Plaintiff is the prevailing party and I find
costs should be shifted in the Plaintiff’s favor. Further, Magistrate Griffin already
awarded fees in connection with the Plaintiff’s 2020 motion to compel. I find the
Plaintiff’s request for fees of $410.00 be granted as reasonable and unopposed.
130
D.I. 100, p.21.
131
D.I. 102, p.11–13.
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III. CONCLUSION
For the foregoing reasons, I find the Plaintiff has proven her claim for
equitable fraud and, to remedy that fraud, I recommend equitable recission of the
transfer of the Original Title to the Defendant. Title to the Coupe should revert to
the Plaintiff. Further, fees in the amount of $410.00 and costs for this action should
be shifted in the Plaintiff’s favor. The parties shall submit a proposed form of
implementing order within ten (10) days of this becoming a final order of the Court.
This is my final report and exceptions may be filed under Court of Chancery
Rule 144.
28