IMO The Niki And Darren Irrevocable Trust and The N And D Delaware Irrevocable Trust

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN THE MATTER OF THE NIKI AND )
DARREN IRREVOCABLE TRUST )
AND THE N AND D DELAWARE ) C.A. No. 2019-0302-SG
IRREVOCABLE )
TRUST )
MEMORANDUM OPINION
Date Submitted: March 20, 2024
Date Decided: July 24, 2024
Jon E. Abramczyk, Todd A. Flubacher, Matthew R. Clark, Courtney Kurz, and Anne
Grae Martin, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington,
Delaware, Attorneys for Petitioner Comerica Bank & Trust, NA.
Thomas A. Uebler and Sarah P. Kaboly, MCCOLLOM D’EMILIO SMITH
UEBLER LLC, Wilmington, Delaware, Attorneys for Respondent Niki Tesak.
W. Donald Sparks, II, Chad M. Shandler, and Christine D. Haynes, RICHARDS,
LAYTON & FINGER, P.A., Wilmington, Delaware, Attorneys for Respondent
Darren Rushin.
William M. Kelleher, GORDON, FOURNARIS & MAMMARELLA, P.A.,
Wilmington, Delaware, Attorney for Respondent Ildiko Juhasz de Tesak.
GLASSCOCK, Vice Chancellor
Ildiko Juhasz de Tesak (“Ildiko”)1 is a wealthy and successful resident of El
Salvador. In 2012, she settled a substantial, irrevocable trust to provide for her
daughter, Claudia Elena Tesak (“Niki”), and Niki’s then-husband, Darren J. Rushin
(“Darren”), and their children. That 2012 trust2 made Ildiko the life beneficiary, able
to request the income but not to invade the principal. Upon her death, the trust
corpus would fund two successor trusts, one for benefit of Niki (funded with 55% of
the corpus) and one in favor of Darren (funded with the remainder). Upon their
deaths, the trust would be distributed in equal shares to their children in successor
trusts. The 2012 Trust was established in California. Ildiko was the Trustee. The
2012 Trust declares itself “irrevocable” at Article 1.3 but also provides a revocation
mechanism at Article 7.1, which requires the assent of Ildiko, Darren and Niki. The
settlor does not have a unilateral right of revocation. The trust is explicitly not
subject to amendment.3
By 2014, for a number of reasons, the parties wanted to amend the trust.
Darren in particular wanted an amendment that would accelerate vesting of the
successor trust in his favor upon divorce. That is, the 2012 Trust did not vest for the
1
I follow the practice of counsel here and refer to the litigants by first name or preferred name for
the sake of clarity; no disrespect or familiarity is intended.
2
I refer to the trust formed under California law in 2012 as the “2012 Trust” and the 2014 Trust
organized in Delaware as the “2014 Trust.” I note that the 2012 Trust was moved to Delaware,
briefly, before it was (purportedly) decanted into the 2014 Trust, and presumably remains a
Delaware trust.
3
JX12 at 739 § 7.2.
1
benefit of Darren until Ildiko’s death; Darren sought an amendment that would allow
his portion to vest as soon as he and Niki divorced. With the help of counsel, the
parties created a new trust. This 2014 Trust would be a Delaware trust. Defendant
Comerica Bank & Trust, NA was the named trustee. The 2014 Trust had some
substantial differences from the 2012 Trust. First, it provided for Darren’s desire to
have his interest vest upon divorce; if divorce occurred before Ildiko’s death, she
would thus be divested of the right to receive the life income from his “share” of the
trust. Next, the successor trust shares between Darren and Niki were adjusted, from
45%/55%, respectively, to 50%/50%. Finally, the 2014 Trust provided that upon
distribution of the remainder interest that the beneficiaries would include not only
the pair’s children together, but “all lineal descendants of all degrees and . . . persons
legally adopted into the class.”4 These changes were largely in favor of Darren, at
the expense of Niki and Ildiko, and the “divorce provision” created a perverse
incentive for the marriage of Darren and Niki. Ildiko and Niki, nonetheless,
consented to the changes.
Ildiko, to facilitate the funding of the 2014 Trust, first transferred the domicile
of the 2012 Trust to Delaware, and named Comerica co-Trustee. The two Trustees
then attempted to fund the 2014 Trust by purporting to “decant” the entire contents
of the 2012 Trust into the 2014 Trust, under Delaware law. Decanting—the
4
JX95 at 3404 §§ 8.5, 8.6, 8.7.
2
withdrawal of the assets from one trust and pouring them into a second trust—is
allowed under our applicable trust statute5 with respect to irrevocable trusts, but only
where and to the extent that the trustee has the power to invade the corpus (a power
absent here regarding the principal purportedly decanted). The 2014 Trust was
subsequently additionally funded with other assets, as well.
In 2017 Darren proposed a “financial divorce” from Niki, and the couple was
formally divorced in 2018. This triggered the vesting of Darren’s successor trust
under the terms of the 2014 Trust. Thereafter, Comerica, joined by Ildiko, brought
this action for instructions; Ildiko argued that the decanting was invalid as a matter
of law, and the assets in the 2012 Trust had not been effectively transferred to the
2014 Trust, and were thus not subject to the divorce provision in the latter trust. I
found this declaratory relief barred by unclean hands;6 Ildiko, as a fiduciary and
beneficiary to the trust, was seeking to benefit from her statutory malfeasance in
attempting the illegal decanting to fund the 2014 Trust. Niki, however, was not a
trustee of the 2012 (or 2014) Trust, and currently seeks a declaration that the
purported decanting was a nullity.
The matter is before me, post-trial. Darren appears to concede that the
decanting was not authorized by statute. He argues that equity should act to confirm
5
See 12 Del. C. § 3528.
6
See In the Matter of Niki and Darren Irrevocable Tr. and the N and D Del. Irrevocable Tr., 2020
WL 8421676, at *3 (Del. Ch. Feb. 4, 2020) (“Mem. Op.”).
3
the purported transfer of assets to the 2014 Trust, under a variety of theories. I find
that the attempted decanting was not permissible under the statute, and that the assets
purportedly decanted should be deemed never to have left the 2012 Trust. I do not
agree that equity is sufficiently invoked to confirm or support the transfer of assets.
A number of issues remain to this litigation, in particular tracing of assets in the 2014
Trust and Darren’s breach of duty claims against Comerica and Ildiko, but I find that
the assets reposed in the 2012 Trust at the time of the ineffective decanting remain
in the 2012 Trust. My reasoning follows.
I. BACKGROUND
A. Factual Background7
1. The Parties
Ildiko Juhasz de Tesak is a citizen of Hungary and El Salvador and a
resident of El Salvador.8 She is not a U.S. citizen.9
Claudia Elena Tesak (“Niki”) is a citizen of El Salvador and a resident of
California.10
7
This Memorandum Opinion only contains facts necessary to my analysis. Citations to the parties’
joint trial exhibits are referred to by the numbers provided by the parties and cited as “JX __”. See
Parties’ Joint Trial Ex. List, Dkt. No. 275. Citations to the parties’ stipulated pre-trial order are
cited as “PTO ¶ __”. Granted (Stipulation and [Proposed] Joint Pretrial Order), Dkt. No. 284.
References to the trial transcripts are cited as “Tr. __:__”. 12-4-2023 Trial Tr.—Volume I, Dkt.
No. 292; 12-5-2023 Trial Tr.—Volume II, Dkt. No. 293; 12-6-2023 Trial Tr.—Volume III, Dkt.
No. 294.
8
PTO ¶ 9.
9
Id.10
Id. ¶ 11.
4
Darren J. Rushin is a resident of California.11
Comerica Bank & Trust, NA (“Comerica”) is a national bank with an office
for the conduct of trust business in Wilmington, Delaware.12 Comerica has
administered the 2014 Trust13 from its offices in Delaware since it accepted its
appointment as Trustee of the 2014 Trust in 2015.14
2. Events Leading to the 2012 Trust and its Creation and Provisions
Ildiko married Pablo Tesak in El Salvador and the pair had three children:
Niki, Carla Tesak Arzente, and Jose Andres Tesak Juhasz.15 Ildiko and Pablo were
married for almost 40 years, until his death.16 During his lifetime, Pablo co-founded
Productos Alimenticos Diana SA de CV (“Diana”), a snack food conglomerate
headquartered in El Salvador.17 After founding Diana, Pablo formed another snack
food company in El Salvador named Bocadeli.18 Pablo owned 50% of Diana and
Bocadeli was owned equally by Niki, Carla, and Andy.19
11
Id. ¶ 12.
12
Id. ¶ 13.
13
Id. ¶ 31.
14
Id.
15
Id. ¶ 9.
16
Tr. (Ildiko) 8:16–12:21, 37:22–24; JX56 at 4047.
17
PTO ¶ 16. Ildiko is prominent in her own right; she received a Ph.D. in law from Eötvös Loránd
University and is an honorary counsel of Czech Republic and Israel. Tr. (Ildiko) 9:1–19, 35:14–
15.
18
PTO ¶ 18.
19
Tr. (Ildiko) 12:22–13:19; Tr. (Niki) 105:17–106:24.
5
Niki and Darren married in El Salvador in 1997.20 Prior to their marriage,
Darren held various jobs ranging from sales to private tennis coach to private pilot.21
After marrying Niki, Darren worked at Bocadeli as a general manager of the
company for approximately a year before he and Niki moved to California in 2004.22
In order to fund the move and their living expenses in California, Niki sold her shares
of Bocadeli to Carla and Andy for $15 million.23 Two years later, Niki and Darren
executed a trust instrument, on June 16, 2006 (the “2006 Trust”), which was never
funded.24 The 2006 Trust instrument specified that if Niki and Darren divorced, the
trust would be divided into two equal shares and administered as separate trusts (the
“Divorce Provision”).25 Three years after the execution of the (never funded) 2006
Trust, Pablo passed away.26
In 2012, Ildiko executed a trust (the “2012 Trust”) to benefit Niki, Darren,
Niki and Darren’s two children, and herself.27 Ildiko settled the 2012 Trust on April
30, 2012. The 2012 Trust was administered in and governed under the laws of
California.28 Ildiko was the settlor, trustee, and sole income beneficiary of the 2012
20
PTO ¶ 14.
21
Tr. (Darren) 425:23–428:9. Darren also ran a business in El Salvador.
22
PTO ¶ 19.
23
Tr. (Niki) 119:6–13, 123:12–24, 126:3, 225:15–17.
24
PTO ¶ 20.
25
JX1 at Schedule A, ¶ A-1(a)-(b).
26
PTO ¶ 10.
27
Id. ¶ 21.
28
JX12 at 733; Id. at 740–41 § 9.3, 751 § 12.7.
6
Trust.29 The 2012 Trust was funded with Ildiko’s interest in Global Infinity, Inc.30
Global Infinity is an investment company that holds various securities and Ildiko is
its sole director.31 Previously in 2003, Ildiko had granted Niki and Darren power of
attorney over Global Infinity.32 Through the years, Darren primarily made
investment decisions on behalf of Global Infinity by working closely with the
Tesak’s family advisor, Robert Brower.33
The 2012 Trust is irrevocable by the settlor. It may, however, be revoked with
the unanimous consent of the settlor (Ildiko) and the two first-order remainder
interest holders (Niki and Darren).34 The 2012 Trust further provides that the trustee
is authorized to distribute to Ildiko “as much of the annual net income of the Trust .
. . as [Ildiko] may request” but does not authorize the distribution of principal to
Ildiko.35 Further, the trustee was prohibited from making any “distribution of
income or principal . . . to any person other than [Ildiko].”36 Upon Ildiko’s death,
the 2012 Trust would be divided into separate trusts, with 55% held for Niki’s benefit
29
PTO ¶ 22.
30
Id. ¶ 23.
31
Id.
32
JX6.
33
Tr. (Niki) 129–30; Tr. (Darren) 455:21–456:21; JX259 at 10–11. Robert Brower is an account
manager with UBS Financial Services and has managed Global Infinity’s assets since its
formation. JX259 at 31.
34
JX12 at 733, 739 §§ 1.3, 7.1.
35
Id. at 734 § 2.1.
36
Id.
7
and 45% held for Darren’s benefit.37 Subsequently, Niki and Darren would be
entitled to distributions of “as much of the income and principal” of their separate
trusts “as the Trustees consider necessary for [their] health, education, support, and
maintenance in [their] accustomed manner of living.”38
To assist with the creation of the 2012 Trust, Ildiko hired California attorney
Miguel Leff, who in turn sought the assistance of Janet Ambrozek, another
California attorney, to assist in drafting the trust documents.39 Despite the fact that
Ildiko was the sole client listed on the engagement letter, Niki and Darren
participated in each discussion with the attorneys concerning the creation of the
trust,40 with Darren primarily leading these discussions.41
3. Formation of the 2014 Trust
Two years after the formation of the 2012 Trust, Mr. Brower informed Ildiko,
Darren, and Niki that he did not feel comfortable with the ability of Mr. Leff and
Ms. Ambrozek to provide accurate tax advice, in light of the amount of assets
involved in trust.42 Darren was dissatisfied with the 2012 Trust for reasons of his
own, as Mr. Brower also informed him that the 2012 Trust did not contain a Divorce
37
Id. at 734 §§ 3.1, 3.1.1, 3.1.2.
38
Id. at 735–36 §§ 4.1, 5.1.
39
PTO ¶ 21.
40
Tr. (Darren) 448:16–454:2.
41
See, e.g., JX5; JX8; JX9; JX11; JX12; Tr. (Darren) 445:23–446:8.
42
Ex. 7 to Notice of Lodging (Dep. Tr. of Robert L. T. Brower) 36:4–38:23, Dkt. No. 286 (“Brower
Dep.”); JX259 at 36, 113–16, 131.
8
Provision, as had the (unfunded) 2006 trust.43 Darren avers he was unaware that the
2012 Trust did not contain a divorce disposition scheme until Mr. Brower so
informed him.44 In Darren’s view the provisions of the 2012 Trust were “supposed”
to mirror the 2006 Trust, which contained the Divorce Provision, and should include
an even 50/50 spilt of the trust upon the triggering of the Divorce Provision.45 Darren
stressed the importance of these issues to Niki over multiple occasions.46 Neither
Niki nor Ildiko ultimately refused consent to Darren’s request.47
Mr. Brower recommended that Ildiko contact Patrick Martin at Procopio,
Cory, Hargreaves & Savitch LLP (“Procopio”) to review the 2012 Trust and
potential tax issues.48 Darren retained Mr. Martin in March 2014.49 On June 4, 2014,
Darren, Mr. Leff, Ms. Ambrozek, and Mr. Martin—but not Ildiko or Niki—met at
the offices of Procopio in San Diego.50 Darren directed Procopio to draft a new trust
with distribution provisions that followed the 2006 Trust, not the 2012 Trust.51 In
particular, Darren directed Procopio to form the trust to be divided equally upon
43
Tr. (Darren) 462:6–12.
44
Id. 462:13–16.
45
Tr. (Niki) 164:2–12; Tr. (Darren) 466:7–10.
46
Niki stated that Darren “kept saying, although no one else has corroborated this since, that they
made a very big monetary mistake, it was going to cost us I don’t know how much money, and
that Patrick Martin and him were fixing it and that we needed another trust and he wanted one that
had a divorce clause and that had 50/50.” Tr. (Niki) 164:2–10.
47
Tr. (Darren) 471:23–472:8.
48
Brower Dep. at 36–38, 113–15; Tr. (Darren) 460:2–464:9.
49
Tr. (Darren) 463:9–464:9; JX210.
50
PTO ¶ 24.
51
Tr. (Darren) 465:19–466:14.
9
Ildiko’s death, and to include a provision that required his half of the trust to vest
immediately upon a divorce occurring during Ildiko’s life.52 Again, neither Ildiko
nor Niki objected to the inclusion of such a provision.53
After the June 4, 2014 meeting, Procopio drafted a set of documents to (a)
transfer the situs of the 2012 Trust from California to Delaware; (b) appoint
Comerica as co-trustee of the 2012 Trust; (c) create the 2014 Trust (the “2014
Trust”) with Comerica as sole trustee; and (d) appoint principal and income of the
2012 Trust to Comerica as Trustee of the 2014 Trust under 12 Del. C. § 3528.54
Later that year, Procopio attempted to determine the best method to transfer the
assets from the 2012 Trust to the 2014 Trust.55 During this strategic planning, Mr.
Martin disregarded Mr. Leff’s recommendation to revoke the 2012 Trust, since Mr.
Martin believed that would have resulted in a $30 million gift transfer, which would
have created a significant tax liability.56 By its terms, the 2012 Trust could not be
amended.57 Eventually, Mr. Martin chose to use the decanting procedure in 12 Del.
C. § 3528, which he understood allowed a trustee to decant trust assets to a new trust
“when the trustee has the power to distribute principal.”58
52
Ex. 8 to Notice of Lodging (Dep. Tr. of Patrick W. Martin) 32–33, 127, 138, Dkt. No. 286
(“Martin Dep.”).
53
Tr. (Darren) 471:23–472:8.
54
PTO ¶ 25.
55
Martin Dep. 23.
56
JX24.
57
JX12 at 739 § 7.2.
58
Martin Dep. 101–18, 181–82, 184–85; JX23; JX25; JX26.
10
The latter condition proved problematic, however. In a December 10, 2014
email, Mr. Martin relayed to Darren that the 2012 Trust did not specify that Ildiko,
the settlor, was permitted to distribute the principal during her lifetime, which Mr.
Martin attributed to a drafting omission by Ms. Ambrozek.59 Within that same
email, Mr. Martin informed Darren that the draft 2014 Trust still had the 45% and
55% beneficiary designations, as he believed the proposed 50% and 50% beneficiary
designations raised “important technical issues.”60 Mr. Martin did not specify in his
email what these “technical issues” were and was unable to recall what they were
for purposes of this proceeding.61 Sometime after the December 10, 2014 email,
however, the draft of the 2014 Trust was changed to reflect an even 50/50 spilt
between Niki and Darren, and to provide for the Divorce Provision under which
Darren’s share would vest upon their divorce.62
Procopio sent execution copies for the execution of the 2014 Trust to Niki on
December 19, 2014, so that Niki could hand deliver the documents to Ildiko in El
Salvador during the holidays.63 The documents provided to Niki included an
instruction letter for Darren, an instruction letter for Ildiko with a Spanish
59
JX26; Tr. (Darren) 620:14–19.
60
JX26 at 1.
61
Id.; Martin Dep. 99.
62
Compare JX30 at 794 § 2.2, with JX26 at 5582 § 2.2.
63
JX33; JX34.
11
translation, and execution copies of the 2014 Trust and related documents with a
Spanish translation.64
4. Execution of the 2014 Trust
On Christmas Eve of 2014, the Tesak family gathered in El Salvador for the
holidays.65 That same day, Ildiko, in her capacity as trustee, moved the situs of
administration of the 2012 Trust to Delaware, changed the governing law to
Delaware, and appointed Comerica to be the co-trustee of the 2012 Trust.66 Also on
this day, Ildiko settled the 2014 Trust, appointing Comerica as the sole trustee and
leaving herself as life beneficiary.67 Later, Ildiko and Comerica (the “Trustees”), as
trustees of the 2012 Trust, decanted (or purported to decant) the 2012 Trust corpus
into the 2014 Trust (the “Decanting”).68 Ildiko, in her capacity as one of the 2012
Trust’s two co-Trustees, and Comerica executed a trustee resolution (the “Trustee
Resolution”) purporting to “exercise [her] discretionary power to distribute all of the
principal and income of the 2012 Trust and appoint all of the principal and income
64
JX33.
65
PTO ¶ 26; JX33; see also Tr. (Niki) 175:4–176:8; Tr. (Darren) 483:9–484:7.
66
JX84 at 3667. The parties disagree about the validity of the Decanting but have not contested
the validity of any portion of the 2012 Trust, either as formed (under California law) or after
transferred to Delaware (under Delaware law). Any such arguments have been waived, and
therefore I assume that the 2012 Trust as of December 24, 2014, was a valid Delaware irrevocable
trust, with its various provisions enforceable under Delaware law, and specifically subject to 12
Del C. § 3528.
67
JX56 at 4016.
68
JX84 at 3662.
12
of the 2012 Trust to Comerica . . . as trustee of the [2014] Trust . . . .”69 The assets
purportedly appointed to the 2014 Trust by the Trustee Resolution were the 2012
Trust’s ownership interests in Global Infinity and Hacienda 2-503 LLC, which owns
a condominium in Mexico.70
Ildiko, Niki, and Darren, as beneficiaries of the 2012 Trust, all signed
acknowledgements and statements of non-objection or consent to the Decanting
within three months of the execution of the Decanting.71 The acknowledgements
and statements of non-objection or consent provided that the each was aware of the
current assets of the 2012 Trust and its various beneficial interests, and
“[c]onsent[ed] to the [] Trustees of the [2012 Trust] exercising their discretionary
power to distribute all of the principal and income of the [2012 Trust] to Comerica .
. . as trustee of the [2014 Trust], pursuant to 12 Del. C. § 3528.”72 Each consent
acknowledged that the undersigned “is aware of the undersigned’s rights, and aware
of all of the material facts in connection with the foregoing documents, the [2012
Trust], the [2014 Trust] and all of the other issues raised herein.”73
69
Id.
70
PTO ¶ 34.
71
JX84 at 3665; JX84 at 3658, 3660; PTO ¶ 28.
72
JX84 at 3665; JX84 at 3658, 3660.
73
Id.
13
According to Ildiko and Niki, neither reviewed the contents of the 2014
Trust’s execution documents provided by Procopio,74 and they contend that Darren
did not make them aware that the 2012 Trust did not specify that Ildiko could
distribute the principal of the 2012 Trust during Ildiko’s lifetime.75 Darren, by
contrast, maintains that Ildiko and Niki were well aware of the provisions contained
in the 2014 Trust, pointing to their executed consents.76 Niki did not obtain nor
consult separate counsel throughout the formation and execution of the 2014 Trust.77
Ildiko, also, did not consult her own counsel, Mr. Leff, before signing the documents
in December 2014.78 In particular, once Mr. Leff discovered that Ildiko had signed
the documents without first consulting him, he expressed his frustration to
Procopio.79 Despite this frustration, Mr. Leff thereafter gave Procopio the “green
light” to execute the 2014 Trust, indicating that Ildiko did not have a desire to make
any changes to the 2014 Trust.80 Comerica executed the trust documents on June
74
See Tr. (Ildiko) 42:19–43:3; Tr. (Niki) 182:18–24 (“Because Darren said this needed to be done
for trust. He put it – I didn’t – very casually, like, okay, Patrick just needs us to sign this. I got a
notary. It’s for the trust just to finalize, blah, blah, saying whatever nice thing he has to say, don’t
worry about it, it’s just documents, something along those lines.”).
75
See Ex. 3 to Notice of Lodging (Dep. Tr. of Darren Rushin) 124:4–19 (“Darren Dep.”), Dkt. No.
286; Tr. (Darren) 536:23–537:10; Tr. (Niki) 172:9–13.
76
JX177; JX84 at 3665.
77
Tr. (Niki) 182:18–24. This testimony, however, is conflicts with Niki’s cross-examination at
trial. Id. 242:18–243:5. Nevertheless this determination is not necessary for my analysis and I
decline to resolve the dispute.
78
Tr. (Ilidko) 64:23–65:22; see also JX177, Ex. E.
79
JX52.
80
JX55 at 1.
14
24, 2015, creating the “N and D Delaware Irrevocable Trust,” that is, the 2014
Trust.81
5. The Validity of 2014 Trust is Questioned
In 2018, Darren’s attorneys proposed a financial divorce from Niki, which
would include separate trusts apart from the 2014 Trust, but would allow him to
remain manager of all the assets and to receive a management fee.82 Darren engaged
Connolly Gallagher to explore avenues to modify the 2014 Trust pursuant to this
plan, since lawyers at Procopio were unable to give advice on Delaware law because
they were not Delaware attorneys.83 Consequently, in April 2018 Niki engaged DLA
Piper to advise her on the proposed financial divorce.84 However, that same year,
Niki and Darren separated and began divorce proceedings on June 20, 2018, in the
Superior Court of California, County of San Diego.85 On January 24, 2020, the court
entered a decree dissolving their marriage effective December 20, 2019.86
In early 2019, Ildiko engaged Delaware counsel, Gordon, Fournaris &
Mammarella, P.A., who received copies of the documents creating and executing
the 2014 Trust.87 It was not until the resulting review by Ildiko’s counsel that she
81
JX95.
82
Tr. (Niki) 207:12–15; JX134; JX135; Tr. (Darren) 625:7–21.
83
JX133.
84
PTO ¶ 37; Tr. (Niki) 202:21–203:3, 203:24–204:4; Darren Dep. 190:12–21. Niki did
not engage DLA Piper at this time to initiate divorce proceedings. Tr. (Niki) 204:18–20.
85
PTO ¶ 15.
86
Id. ¶ 105.
87
Id. ¶ 40.
15
claims to have first become aware that the Decanting creating the 2014 Trust may
be invalid.88 On February 15, 2019, Ildiko’s Delaware attorneys contacted Deborah
Taylor, Comerica’s trust officer in Delaware, to advise her that Ildiko and her
counsel believed that the Decanting, and thus the funding of the 2014 Trust, was
invalid.89 Following Ms. Taylor’s call with Ildiko’s lawyers, Comerica retained
Delaware trust counsel, Morris, Nichols, Arsht & Tunnell LLP, to review the
Decanting.90 Consequently, Comerica concluded that the Decanting was invalid
since the Trustees lacked the power to distribute principal during Ildiko’s lifetime,
and the interests of the remainder beneficiaries under the 2014 Trust were not
substantially identical to their interests under the 2012 Trust.91
B. Procedural History
Comerica initiated this action on April 22, 2019, by filing a Verified Petition
pursuant to 10 Del. C. § 6504 requesting instruction from this Court to determine
whether the Decanting was void and whether the Court should order that the
principal and income appointed to the 2014 Trust return to the 2012 Trust.92 On
August 27, 2019, Darren filed his Answer, Counterclaims, and Cross-Claims.93
88
See Tr. (Ildiko) 21:5–12.
89
PTO ¶ 41; Ex. 1 to Notice of Lodging (Dep. Tr. of Deborah E. Taylor) 43–49, 55, Dkt. No. 286.
90
PTO ¶ 42.
91
Ex. 6 to Notice of Lodging (Dep. Tr. of Todd A. Flubacher, Esquire) 11:22–12:16, Dkt. No.
286.
92
Verified Pet. for Instructions Pursuant to 10 Del. C. Section 6504, Dkt. No. 1.
93
Darren J. Rushin's Answer to the Verified Pet. for Instrs. and Verified Countercls. and Cross-
Cls., Dkt. No. 32.
16
Comerica filed a Motion for Judgment on the Pleadings on April 23, 2020,94 which
was joined by Ilidko and Niki five days later.95
Darren filed an Amended Answer, Counterclaims, and Cross-Claims shortly
thereafter,96 asserting that (1) Comerica had breached its fiduciary duties as trustee
of both the 2012 Trust and the 2014 Trust, (2) Ildiko had breached her fiduciary duty
as trustee of the 2012 Trust, (3) Ildiko had aided and abetted Comerica’s breach of
fiduciary duties, and (4) there existed a civil conspiracy between Ildiko and
Comerica.97 Ildiko and Comerica responded on June 10 and June 23, 2020,
respectively.98 Comerica filed a revised Motion for Judgment on the Pleadings on
June 30, 2020,99 which was again joined in by both Ildiko and Niki.100 On July 14,
2020, Darren responded to the Petitioner’s Motion and filed his own Cross-Motion
for Judgment on the Pleadings.101
After the matter was briefed and argued, I denied the Trustees’ Motion,
holding that the doctrine of unclean hands, pertaining to Ildiko and Comerica, barred
94
Pet’r’s Mot. for J. on the Pleadings, Dkt. No. 81.
95
Ildiko Juhasz de Tesak’s Joinder in Pet’r’s Mot. for J. on the Pleadings, Dkt. No. 86; Niki’s
Joinder to Comerica’s Mot. for J. on the Pleadings, Dkt. No. 87.
96
Darren J. Rushin’s Am. Answer to the Verified Pet. for Instrs. and Verified Am. Countercls. and
Cross-Cls., Dkt. No. 95.
97
Id. ¶¶ 40–68. Darren also seeks, as Counts VI and VII, the removal of Comerica as trustee of
both the 2012 Trust and the 2014 Trust. Id. ¶¶ 69–75.
98
Ildiko Juhasz de Tesak’s Resps. to Darren Rushin’s Am. Countercls. and Cross-Cls., Dkt. No.
99; Pet’r-Countercl.-Def.’s Resp. to Verified Am. Countercls., Dkt. No. 100.
99
Revised Opening Br. in Supp. of Pet’rs’ Mot. for J. on the Pleadings, Dkt. No. 102.
100
Ildiko Juhasz de Tesak’s Revised Joinder in Pet’r’s Mot. for J. on the Pleadings, Dkt. No. 103;
Niki’s Revised Joinder to Comerica’s Mot. for J. on the Pleadings, Dkt. No. 104.
101
Resp’t James [sic] Darren Rushin’s Cross-Mot. for J. on the Pleadings, Dkt. No. 105.
17
the Court from hearing the merits of the Verified Petition.102 I found, inter alia, that
Comerica and Ildiko, as Trustees, had a duty to ensure that the Decanting did not
violate applicable statutory law, but nonetheless relied in their petition on their
assertion that they had violated the law. In that case, I found, they could not
themselves invoke equity on that basis to benefit one of the beneficiaries to the
detriment of another, and to benefit Ildiko, as a beneficiary, as well.103
On October 21, 2021, Niki filed an Amended Answer to the Verified Petition,
which added a Counterclaim and Cross-Claim against Comerica and Darren
respectively, seeking a declaration that the Decanting was invalid and void ab initio
and seeking the return of the decanted assets to the 2012 Trust.104 Darren then
asserted a cross-claim for conspiracy against Niki, which was identical to his claim
against Comerica and Ildiko and sought a declaration instructing Comerica to
distribute any non-decanted assets in accordance with the terms of the 2014 Trust.105
102
Mem. Op. *3.
103
Id. at *7.
104
Claudia Elena Tesak de Rushin's Am. Answer to Verified Pet. for Instrs., Countercl., and Cross-
Cl., Dkt. No. 164.
105
Darren J. Rushin's Answer to Niki's Verified Countercl. and Cross-cl. and Verified Am.
Countercl. and Cross-Cl., Dkt. No. 184.
18
Niki moved to dismiss Darren’s Amended Counterclaim and Cross-Claim on
March 16, 2022.106 The motion was fully briefed on June 8, 2022.107 At oral
argument, I deferred ruling on the motion and directed the parties to mediation
pursuant to Court of Chancery Rule 174(c).108 The parties were unable to resolve
their dispute in mediation, and the parties commenced fact discovery.109 On June
26, 2023, Darren moved for partial summary judgment on his breach of fiduciary
claims and related claims for damages.110 On July 12, 2023, I deferred decision on
Niki’s motion to dismiss and Darren’s motion for partial summary judgment until
trial.111
I conducted a three-day trial on December 4 through December 6, 2023.112
After trial, each party submitted their respective post-trial opening113 and answering
106
Claudia Elena Tesak de Rushin’s (Niki's) Mot. to Dismiss Darren Rushin’s Am. Countercl.,
Dkt. No. 185.
107
See Claudia Elena Tesak de Rushin’s Opening Br. in Supp. of her Mot. to Dismiss Darren’s
Civil Conspiracy Cl., Dkt. No. 192; Resp’t Darren James Rushin's Answering Br. in Opp’n to
Niki's Mot. to Dismiss Darren's Civil Conspiracy Cross-Cl., Dkt. No. 194; Niki's Reply in Supp.
of Her Mot. to Dismiss Darren's Civil Conspiracy Cl., Dkt. No. 207.
108
Tr. of 7.7.22 Oral Arg. and Rulings of the Ct. on Defs.' Mot. to Dismiss 30:6–32:12, Dkt. No.
216; Order, Dkt. No. 219.
109
See Stipulation and Proposed Order Modifying Case Schedule, Dkt. No. 221.
110
Resp’t Darren Rushin's Mot. for Partial Summ. J., Dkt. No. 258.
111
Letter to Counsel, Dkt. No. 266.
112
Trial before Vice Chancellor Sam Glasscock dated 12.4.23 through 12.6.23, Dkt. No. 291.
113
Ildiko Juhasz de Tesak's Post-Trial Br., Dkt. No. 297 (“Ildiko OB”); Niki Tesak’s Post-Trial
Opening Br., Dkt. No. 298 (“Niki OB”); Darren Rushin's Opening Post[-]Trial Br., Dkt. No. 299
(“Darren OB”); Pet’r-Countercl. Def. Comerica Bank & Trust, NA's Opening Post-Trial Br., Dkt.
No. 300 (“Comerica OB”).
19
briefs.114 I heard post-trial oral argument on March 20, 2024, and considered the
matter submitted that day.115
This Memorandum Opinion only concerns the validity of the Decanting (and
whether equitable relief may result); other claims in this matter will be addressed
separately.
II. ANALYSIS
The question before me is whether the assets of the 2012 Trust were validly
decanted into the 2014 Trust. Niki seeks the following relief: (a) a declaration that
the Decanting was invalid under Delaware law and void ab initio; (b) a declaration
that Darren’s equitable defenses do not preclude Niki’s claims or otherwise validate
the invalid decanting and are meritless; and (c) an order instructing Comerica that
the assets of the 2012 Trust purportedly decanted to the 2014 Trust be returned to
the 2012 Trust nunc pro tunc, among other requests for relief.116 Niki has the burden
of proving that the Decanting violated 12 Del. C. § 3528(a).117
114
Ildiko Juhasz de Tesak's Post[]trial Answering Br., Dkt. No. 307 (“Ildiko AB”); Pet’r-
Countercl.-Def. Comerica Bank & Trust, NA's Answering Post-Trial Br., Dkt. No. 308 (“Comerica
AB”); Niki Tesak’s Post-Trial Answering Br., Dkt. No. 309 (“Niki AB”); Darren Rushin's
Answering Post[-]Trial Br., Dkt. No. 310 (“Darren AB”).
115
Post-Trial Oral Arg. before the Honorable Vice Chancellor Sam Glasscock III on 3.20.2024,
Dkt. No. 316.
116
PTO ¶ 54. Niki also seeks relief in the form of (a) an order transferring the non-decanted assets
of the 2014 Trust to the 2012 Trust or directing Comerica to distribute those assets in further trust
under the terms of the 2014 Trust; (b) a declaration that Niki is not liable for civil conspiracy or
that Darren suffered no damages, or both; (c) a declaration that Darren has unclean hands; and (d)
an order awarding her attorneys’ fees and costs. Id.
117
Physiotherapy Corp. v. Moncure, 2018 WL 1256492, at *3 (Del. Ch. Mar. 12, 2018).
20
A. The Decanting is a Nullity and the Assets that were Decanted to the 2014
Trust Should be Returned to the 2012 Trust
The Decanting Statute, 12 Del. C. § 3528(a), pertinently provides that:
[A] trustee who has authority . . . to invade the principal . . . of a trust
(the “first trust”) . . . to make distributions to, or for the benefit of, 1 or
more proper objects of the exercise of the power, may instead exercise
such authority . . . by appointing all or part of such principal . . . subject
to the power in favor of a trustee of a second trust . . . under an
instrument other than that under which the power to invade is created .
. . .118
In other words, to have the power to decant the principal from one trust to another,
the trustee must have the power to invade and distribute that principal.
By referring to Section 3528 as the “decanting statute,” and by the use of
ellipses in quoting the statute, I do not mean to suggest that the section is limited
solely to a “decanting” of the principal from one trust into a second trust. The section
itself does not define the term “decant,” and the subsection quoted does not even use
that wording.
“Decant” is an interesting verb; its root is cant, or tilt.119 Originally, it meant
to gently pour a liquid, as wine, into a new container, gradually tilting the old
container so as to pour the clear liquor into the new, while leaving behind the lees or
dregs.120 The term has been imported into trust law to describe the transfer of the
118
12 Del. C. § 3528 (a) (2020).
119
See Decant, MERRIAM-WEBSTER ONLINE, https://www.merriam-
webster.com/dictionary/decant (last visited July 11, 2024).
120
Id.
21
essence of a beneficial interest from an old trust to a new, and presumably better,
trust. The power of a trustee to thus decant logically must come from the power of
that trustee to exercise her discretion to appoint or distribute the fruits of the
beneficial interest under the terms of the old trust; from this, it follows, she has a
concomitant (but not greater) power to transfer the beneficial interest to a new trust.
The extent to which such a power was recognized at common law in Delaware
is unclear; since 2013 the power to decant is provided by statute, 12 Del C. § 3528.
That statute has what must be one of the longer first sentences in our statutory law,
viz:
(a) Unless the terms of the instrument expressly provide otherwise, a
trustee who has authority (whether acting at such trustee's discretion or
at the direction or with the consent of an adviser), under the terms of a
testamentary instrument or irrevocable inter vivos trust agreement
(including a trust that, by its terms, is revocable but was created by a
settlor who presently lacks the capacity to revoke the trust), to invade
the principal or income or both of a trust (the “first trust”) to make
distributions to, or for the benefit of, 1 or more proper objects of the
exercise of the power, may instead exercise such authority (whether
acting at such trustee's discretion or at the direction or with the consent
of an adviser, as the case may be) by appointing all or part of such
principal or income or both as is subject to the power in favor of a
trustee of a second trust, which may be a separate trust or the first trust
as modified after appointment under this section (the “second trust”)
under an instrument other than that under which the power to invade is
created or under the same instrument, provided, however, that, except
as otherwise provided in this subsection:
(1) The exercise of such authority is in favor of a second trust
having only beneficiaries who are proper objects of the
exercise of the power except that the governing instrument of
the second trust may provide that, at a time or upon an event
22
specified in the governing instrument, the remaining trust
assets shall thereafter be held for the benefit of the
beneficiaries of the first trust upon terms and conditions
concerning the nature and extent of each such beneficiary’s
interest that are substantially identical to the first trust’s terms
and conditions concerning such beneficial interests;
(2) In the case of any trust, contributions to which have been
treated as gifts qualifying for the exclusion from gift tax
described in § 2503(b) (26 U.S.C. § 2503(b)) of the Internal
Revenue Code of 1986 (26 U.S.C. § 1 et seq.) (hereinafter
referred to in this section as the “I.R.C.”), by reason of the
application of I.R.C. § 2503(c) (26 U.S.C. § 2503(c)), the
governing instrument for the second trust shall provide that
the beneficiary's remainder interest shall vest and become
distributable no later than the date upon which such interest
would have vested and become distributable under the terms
of the governing instrument for the first trust;
(3) The exercise of such authority does not reduce any income or
unitrust interest of any beneficiary of a trust for which a
marital deduction has been taken for federal tax purposes
under I.R.C. § 2056 or § 2523 (26 U.S.C. § 2056 or § 2523)
or for state tax purposes under any comparable provision of
applicable state law; and
(4) The exercise of such authority does not apply to trust property
subject to a presently exercisable power of withdrawal held
by a trust beneficiary who is the only trust beneficiary to
whom, or for the benefit of whom, the trustee has authority
to make distributions.121
This is not pellucid draftsmanship. The gravamen of the subsection, as I read
it, is that the discretionary or appointment power of a trustee toward a beneficiary,
up to but not beyond such power, may instead be transferred to and administered
from a new trust. Where, as here, the decanting is of the principal of the old trust,
121
12 Del. C. § 3528(a) (2020).
23
the power of the trustee to invade the principal of the old trust is a necessary
predicate to the decanting.122
Niki argues that the Decanting is invalid because it violates 12 Del. C. §
3528(a)(1).123 Niki asserts that the Trustees had no power to distribute the principal
of the 2012 Trust, as they could only distribute income to Ildiko during her
lifetime.124 Niki also contends that the Decanting violated the statute since the 2014
Trust materially changed the remainder interests of Niki and Darren, as Darren’s
distribution interest increased, from 45% to 50%, and accelerated vesting in Darren
upon divorce, rather than upon the death of Ildiko.125 In addition, Niki argues that
the 2014 Trust altered Niki’s and Darren’s power of appointment, as under the 2014
Trust if the pair failed to exercise the power of appointment, the remaining assets
would be held in further trust for their respective children outside their marriage,
compared to the 2012 Trust, which limited their power of appointment solely to the
children that the pair had together.126 I find the first point, regarding the Trustee’s
122
In my February 4, 2020 Memorandum Opinion in this matter, I did not reach the meaning of
the statute, finding in any event that review of the Decanting was precluded by the doctrine of
unclean hands. Nonetheless, in dicta, I interpreted (in a manner I find unpersuasive on further
review) the “substantially identical” requirement of Section 3528(a)(1). That dicta is not binding
as law of the case, and I do not rely upon it here.
123
Niki OB 23–24.
124
Id. at 23.
125
Id. at 23–24.
126
Id. at 24.
24
lack of power to invade the principal, compels me to deem the Decanting a nullity.
Consequently, I need not address Niki’s remaining assertions.
Darren no longer contests the validity of the Decanting,127 but asserts a
number of equitable claims to bar the return of the assets from the 2014 Trust to the
2012 Trust. First, Darren argues that the Decanting is voidable, not void since the
parties could have consented to revoke the 2012 Trust to create the 2014 Trust, and
that for equitable reasons I should confirm the Decanting.128 Darren asserts that
Niki’s unclean hands129 and her acquiescence and/or delay in bringing this action
prevents her from obtaining the relief that she seeks.130 Darren also contends that
equity requires that the decanted assets remain in the 2014 Trust as the relief Niki
seeks would improperly benefit Ildiko.131
127
Tr. of 3-20-2024 Post-Trial Oral Arg. 50:9–13, Dkt. No. 317 (“Post Trial Oral Arg.”).
128
Darren AB 25–28.
129
Darren OB 29–33.
130
Id. at 40–44.
131
Id. at 37–39. In addition, Darren claims that transferring all assets, including assets that did not
stem from the 2012 Trust, in the 2014 Trust to the 2012 Trust would trigger a no-contest provision
in the latter. Id. at 39–40. I need not address this issue here, because this decision deals with the
Decanting alone. In particular, Darren argues that the assets in the 2014 Trust, which did not stem
from the 2012 Trust, should be distributed according to the 2014 Trust’s terms. Id. Following the
creation of the 2014 Trust, additional assets were later contributed to the 2014 Trust, including
interests in Villa Carisa Corp., Meow Holdings Corp., and Playacar Ventures LLC. Villa Carisa
owns a rental property in St. Maarten, Meow Holdings owns a yacht, and Playacar owns two rental
properties in Mexico. PTO ¶ 35. In addition, Niki seeks the return of assets in the 2014 Trust that
derive from assets decanted from the 2012 Trust. Post Trial Oral Arg. 18:5–21:21. Darren also
seeks to enforce a no-contest provision contained within the 2014 Trust. I reserve ruling on the
distribution of assets that did not stem from the 2012 Trust, as well as those that can be traced to
the 2012 Trust, and likewise as to any ancillary matters.
25
I find that the attempted Decanting was ultra vires, and a nullity. Ildiko did
not retain the power to invade the principal of the 2012 Trust, and thus was not
entitled under the statute to decant that principal. Because the purported Decanting
is a nullity, the assets that theoretically flowed thereby from the 2012 Trust to the
2014 Trust should be viewed as never leaving the 2012 Trust. Under 12 Del. C. §
3528(a), trustees are empowered to decant the corpus of a trust where the trustee has
the power to do so by virtue of the ability to appoint the principal. The 2012 Trust
did not provide the Trustees the power to invade the principal during Ildiko’s
lifetime, as the 2012 Trust only provided for distribution of up to the annual net
income of the trust to Ildiko. The Trustees purported to take the assets of the 2012
Trust and use them to fund the 2014 Trust, despite the lack of a power of Ildiko to
invade the principle of the 2012 Trust.
Thus, the Decanting failed to satisfy the requirements of 12 Del. C. § 3528(a).
Since the actions of the Trustees were premised on the Decanting Statute, and since
they were not authorized by the statute, the purported Decanting is a nullity.132
132
See AGR Halifax Fund, Inc. v. Fiscina, 743 A.2d 1188, 1192–95 (Del. Ch. 1999) (finding an
amendment to a corporate charter invalid from its inception because the individuals, who were not
yet elected to the board of directors, lacked the statutory authority under 8 Del. C. § 141(a) to
approve an amendment that had not yet been proposed by the board, as required under 8 Del. C. §
242(b)); Espinoza v. Zuckerberg, 124 A.3d 47, 57 (Del. Ch. 2015) (explaining that purported
ratification of corporate acts taken by written consent under 8 Del. C. § 228 are not effective
unless it complies with the technical requirements of 8 Del. C. § 228); see, e.g., Robbins Hose Co.
No. 1 v. Baker, 2007 WL 3317598, at *8 (Del. Ch. Oct. 31, 2007) (determining appeal board which
substituted its own judgment in reviewing a disciplinary action exceeded scope of authority
26
Consequently, the assets that stemmed from the Decanting must be viewed as never
leaving the 2012 Trust.
B. Equity is Not Sufficiently Invoked to Confirm or Support the Transfer of
the 2012 Trust Assets
I next turn to Darren’s assertion that equity is invoked to bar the relief that
Niki seeks. He first relies on the doctrine of unclean hands.
This Court jealously guards its position as a court of equity. To protect that
interest, and to prevent the exercise of equity from serving as a tool of oppression or
unfairness, the Court may refuse “to consider requests for equitable relief in
circumstances where the litigant’s own acts offend the very sense of equity to which
he appeals.”133 For the doctrine to apply, the alleged inequitable conduct “must have
an ‘immediate and necessary’ relation to the claims under which relief is sought.”134
The actions of Niki that Darren sets forth to support his contention for the application
of the doctrine pertain to her part in the creation of the provisions and execution of,
and her acknowledgement and consent to, the 2014 Trust.135 These actions do not
granted by its by-laws and holding that the appeal board’s actions were ultra vires, thus void, and
to be viewed as if they never happened); see also Apple Comput., Inc. v. Exponential Tech., Inc.,
1999 WL 39547, at *15 (Del. Ch. Jan. 21, 1999) (stating “[v]oid acts, acts that are ultra vires . . .
are legal nullities incapable of cure.”).
133
Nakahara v. NS 1991 Am. Tr., 718 A.2d 518, 522 (Del. Ch. Sept. 28, 1998).
134
Id. at 523 (quoting Kousi v. Sugahara, 1991 WL 248408, at *2 (Del. Ch. Nov. 21, 1991)).
135
Darren argues that Niki has unclean hands because (1) she had ample time to review the 2014
Trust documents and signed them voluntarily, (2) was purportedly represented by counsel in
connection with the 2014 Trust, (3) executed the acknowledgement and consent forms pertaining
to the 2014 Trust, and (4) plotted with Ildiko to invalidate the 2014 Trust. Darren OB 29–36.
27
have an “immediate and necessary” relation to the Decanting, which is the sole issue
at dispute in this matter.136 More significantly, Niki did not owe a legal
responsibility to Darren; as Trustees of the 2012 Trust, Ildiko and Comerica owed
fiduciary duties to the trust’s beneficiaries. Niki’s consent to the terms of the 2014
Trust does not, to my mind, invoke unclean hands in her position on the Decanting.
Thus, I find that the doctrine of unclean hands does not bar the relief that Niki seeks.
Asserting more equitable defenses, Darren claims that acquiescence and
laches also bar relief. The parties argue about whether, in this setting, such equitable
defenses as laches can operate to validate an illegal act.137 I need not reach this issue,
however. In order to invoke laches here, Darren must assert that Niki unreasonably
delayed asserting her rights in a manner that led to his detriment. He has not pointed
to a detriment which equity may address, however. The most he can refer to is the
legal fees he has expended, which do not support laches here.138 Darren also raises
the ability of the beneficiaries to have vitiated the 2012 Trust, which would have
136
Compare Darren OB 29–36 (asserting actions concerning the 2014 Trust attributable to Niki),
with Mem. Op. *6 (identifying actions concerning the Decanting attributable to Comerica and
Ildiko).
137
Darren sets forth Kraft to support his contention that acquiescence and laches can be applied as
a defense even if the Decanting is void. Darren OB 41–43; Post Trial Oral Arg. 44:2–46:10. In
Kraft, the Court found that laches could be asserted as a defense even if the contract at dispute was
considered void. Kraft v. WisdomTree Invs., Inc., 145 A.3d 969, 989 (Del. Ch. 2016). Darren
attempts to distinguish Kraft from Moelis, a recent decision from this Court, which found that
equitable defenses such as acquiescence and laches cannot validate void acts. W. Palm Beach
Firefighters' Pension Fund v. Moelis & Co., 310 A.3d 985, 994, 1000 (Del. Ch. 2024).
138
Darren OB 43.
28
resulted in the assets, theoretically, reverting to the settlor, Ildiko.139 Ildiko would
then have been free to settle a new trust, presumably with the same assets; such a
new trust could have contained the Divorce Provision. Theoretically, if the
Decanting was unavailable (if Niki had, say, pointed out that decanting was illegal),
Darren believes that Niki and Ildiko would have used the revocation route to satisfy
his desire for the divorce condition, despite negative tax consequences. Perhaps.
But that mere speculation is a reed too weak to support the application of laches.
And there is no indication that Niki was aware of the illegality of the Decanting until
shortly prior to this litigation, further preventing application of laches.
As for the doctrine of acquiescence, Delaware recognizes its application
where a claimant:
has full knowledge of his rights and the material facts and (1) remains
inactive for a considerable time; or (2) freely does what amounts to
recognition of the complained of act; or (3) acts in a manner
inconsistent with the subsequent repudiation, which leads the other
party to believe the act has been approved.140
Lehman Brothers141 and Klaassen142 are instructive on how to apply the
doctrine of acquiescence. “Based on the circumstances in both Lehman Brothers
and Klaassen,” a litigant can assert that acquiescence applies as an affirmative
139
Darren AB 25–26.
140
Klaassen v. Allegro Dev. Corp., 106 A.3d 1035, 1047 (Del. 2014) (citation omitted).
141
Lehman Bros. Hldgs., Inc. v. Spanish Broad. Sys., Inc., 2014 WL 718430 (Del. Ch. Feb. 25,
2014), aff'd, 105 A.3d 989 (Del. 2014).
142
Klaassen, 106 A.3d at 1035.
29
defense when “the [opposing party] had the ability to challenge the breach at the
time of the alleged wrongdoing, or as damages were incurred thereby, such that the
[opposing party] was adjudged complicit in the very breach for which [she] sought
relief.”143 In this circumstance, Darren must demonstrate that Niki was aware that
the Decanting was illegal, a fact that was undoubtedly material to Niki’s full
knowledge of her rights. Those facts were not demonstrated at trial. Darren simply
asserts that Niki knew about the divorce provision and that Mr. Leff had the
opportunity to review the 2014 Trust and Decanting documents.144 That, without
more, is insufficient to convince me that Niki was aware that the Decanting was a
nullity and subsequently declined to assert her rights. Thus, I find the doctrine of
acquiescence unavailable under the facts.
Finally, Darren asserts that I have already found that Ildiko had unclean hands
with respect to her request to invalidate the Decanting, and that vindicating Niki’s
position here would create a windfall for Ildiko. But that is not the case, for a variety
of reasons. First, because this decision does not dispose of Darren’s claim against
Ildiko for breach of trust, any “benefit” may prove ephemeral. In addition, unclean
hands barred Ildiko from employing equity to benefit as a beneficiary from her
malfeasance as a trustee. That does not, to my mind, support Darren’s invocation of
143
Fotta v. Morgan, 2016 WL 775032, at *9 (Del. Ch. Feb. 29, 2016) (emphasis in original) (citing
Lehman Bros. Hldgs., Inc., 2014 WL 718430 at *9).
144
Darren OB 41.
30
equity to ratify a null act, based on the fact that non-ratification would work an
incidental benefit on the trustee. Here, I note, it was counsel acting primarily at the
behest of Darren who proposed the Decanting, and I see no equitable bar to finding
that the illegal Decanting was a nullity. Finally, to the extent equity is available and
necessary to prevent a windfall to Ildiko, there are actions short of ratification of the
Decanting which may be applied.145
III. CONCLUSION
For the foregoing reasons, I find that the attempted decanting of the assets
held by the 2012 Trust into the 2014 Trust was a null act, and that equity does not
preserve the funding of the 2014 Trust with these assets. The parties should discuss
how to employ this finding, and present a form of order.
145
Such as, for instance, limiting Ildiko’s access to the income of a portion of the restored 2012
Trust corpus, during her lifetime. I pose this by way of illustration only; by no means have I made
a determination that such an action is justified in equity here.
31