Chachkes v. David
| Decision Date | 12 January 2021 |
| Docket Number | 20-cv-2879 (LJL) |
| Parties | JACOB CHACHKES, Plaintiff, v. JOHN V. DAVID, et al, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Defendants, John V. David ("John David") and Jason V. David ("Jason David") (together, "Defendants"), move, pursuant to Fed. R. Civ. P. 12(b)(6), to dismiss claims 2, 3, 6, and 8 of the complaint, Dkt. No. 1 ("Compl." or "Complaint"), filed against them by Plaintiff Jacob Chachkes ("Plaintiff" or "Chachkes"). See Dkt. Nos. 26, 27. Chachkes cross-moves for summary judgment. See Dkt. Nos. 30-32.
This case involves a dispute between the income beneficiary of an irrevocable trust (the "Jane David Trust" or "Trust"), which was established by that beneficiary's now-deceased but long-term partner, and the son and grandson of that partner. Chachkes is the income beneficiary and long-term partner. The defendants are the son and grandson. The long-term partner, Jane David, passed away in May 2016 but had established the Jane David Trust to benefit Chachkes during his lifetime and her son and grandson after his death. John David is the son of Jane David from a prior marriage. Jason David is John David's son, Jane David's grandson. The facts elaborated herein are taken from the Complaint and documents attached thereto and are accepted as true for purposes of evaluating Defendant's partial motion to dismiss only. Plaintiff's motion for partial summary judgment presents a pure question of law concerning the interpretation of the Jane V. David Irrevocable Trust Agreement, Compl. Ex. A ("Trust Agreement"). The following facts, other than those characterizing the Trust Agreement, are not necessary to the Court's holding with respect to that question.
On August 9, 2001, Jane David, as grantor, established the Jane David Trust, the terms of which are set forth in the Trust Agreement. The Trust Agreement was executed on August 9, 2001 by and between Jane David, on the one hand, and Plaintiff and John David, named as trustees ("Trustees"), on the other. Pursuant to the Trust Agreement, Jane David irrevocably transferred to the Trustees certain assets to be held and administered in accordance with the terms, provisions and conditions of the Trust Agreement. The Trust was also partially funded by assets of Plaintiff. Compl. ¶ 15.
The Trust Agreement designated Plaintiff as the income beneficiary entitled to be paid the entire net income received by the Trust (after payment of all administrative obligations or premiums on life insurance policies, if any) until Plaintiff's death. The Trustees were required to pay "the entire net income received by the Trustees" to Plaintiff "in monthly or other convenient installments." Trust Agreement, Article II(A). Upon Plaintiff's death, if Jane David was still living, she would be entitled to the income from the Trust. Id.
In addition to income, the Trust Agreement provided, with respect to principal, as follows:
[T]he Trustees, with the exception of [Plaintiff], are authorized to pay to, or for the benefit of the income beneficiary, such portions of the principal of this Trust, whether the whole or a lessor amount, as the Trustees shall, from time to time, determine to be necessary in their absolute and uncontrolled discretion for their health, education, maintenance and support, in accordance with his station in life, due regard being given by the Trustees to the amount of income available to him from the Trust, and from sources other than this Trust. It is the Grantor's intention that the health, maintenance and support of the income beneficiary shall be of primary concern, and the Trustees shall exercise their discretion in using principal for the income beneficiary in a reasonable manner consistent with maintaining the accustomed manner of living of the income beneficiary, considering all other beneficiaries of the Trust to be secondary and without liability to any other beneficiary for the use of principal for the income beneficiary.
Trust Agreement, Article II(B).
Under the Trust Agreement, John David is designated as remainder beneficiary of the Jane David Trust, entitled to distribution of the trust assets upon the death of Plaintiff and Jane David if John David were then living. See Compl. ¶ 23. John David's children, including Jason David, were designated as successor remainder beneficiaries, entitled to distribution of the assets of the Trust, in trust, if John David were not living. See id.
Under the heading "Removal and Resignation of a Trustee," the Trust Agreement provided as follows:
JACOB CHACHKES, during his lifetime, at his discretion, may remove or cause the removal of a Trustee or any successor Trustee, as Trustee under the trust. Upon such removal or in the event of the resignation of a Trustee or any successor trustee, the [sic] JACOB CHACHKES shall designate, at his own discretion, another Trustee to serve as successor trustee hereunder.
Trust Agreement, Article VIII(E).
The Trust Agreement thereby provided that after Plaintiff's death, John David would have the right to remove or cause the removal of a Trustee, or any successor Trustee, as Trustee under the Jane David Trust.
At around the same time the Trust Agreement was executed, Plaintiff established a second irrevocable trust, the Jacob Chachkes Irrevocable Trust (together with the Jane David Trust, the "Trusts"), funded with a combination of Plaintiff's and Jane David's assets. See Compl. ¶ 14. Prior to 2019, Plaintiff generally took distributions of both income and principal from the Jane David Trust as needed to pay his—and, before her death, Jane David's—expenses, including rent, utilities and taxes, and one-time expenses such as trips and gifts to John David and Jason David. Id. ¶ 26. Distributions from the Jane David Trust were Plaintiff's primary source of income. Id. ¶ 25.
Jane David died in May 2016. Id. ¶ 28.
In or about 2018, Jason David asked Plaintiff to agree to a loan of approximately $4 million from the Trusts—virtually all of the combined assets of the two Trusts—to invest in a business venture, and Plaintiff refused the request. Id. ¶ 29.
In April 2019, Plaintiff married his current wife, Helene Fischer.
Whereas previously John David did not object to any of the distributions of income to Plaintiff, following—and, Plaintiff avers, in apparent response to—these two events, John David began objecting to and limiting Plaintiff's distributions from the Jane David Trust principal as may be appropriate pursuant to Article II(B) of the Trust Agreement. Id. ¶ 31. John David also allegedly failed to cause the Jane David Trust to make regular monthly distributions of income to Plaintiff, placing Plaintiff in an untenable financial situation. Id. ¶ 32. Plaintiff alleges that John David was unhappy that he did not receive an inheritance from Jane David, that he was spiteful about the refused loan, and that he was intending to preserve the Jane David Trust's assets for himself and his children. Id. ¶¶ 31, 33.
In July 2019, Plaintiff and his wife executed, with John David, Jason David, and two other successor remainder beneficiaries, the "Agreement of the Jane V. David Irrevocable Trust Agreement, dated August 9, 2001" ("2019 Agreement"). Compl. Ex B. The 2019 Agreement reflected the agreement of the parties "to make certain withdrawals from principal of the [Jane David] Trust . . . and to continue the [Jane David] Trust for the benefit of [Plaintiff], as the Income Beneficiary." 2019 Agreement at 2. It then provided for the distribution of income and principal from the Jane David Trust as follows: Plaintiff was to continue to receive the accrued income to date of the Trust plus a one-time payment from principal of $317,843.40, John David was to receive a one-time payment of $500,211.27 from principal and Jason David was to receive a one-time payment of $235,000 from principal. In addition, and as partial consideration for such payments, Plaintiff agreed to conditionally resign as a Trustee of the Trust on a number of conditions. Included among those conditions were that there would be a monthly payment of the greater of actual income or $9,500.00 first from income and then from principal of the Jane David Trust. The 2019 Agreement recited that the discretion of the remaining Trustee with respect to the distribution of income or principal was conclusive and would not be subject to judicial review:
2. Conclusive Discretion of Trustee. In accordance with the terms of Article II of the Trust Agreement, the Trustee may exercise the discretionary powers conferred in a manner, which will provide flexibility in the administration of the Trusts under conditions from time to time existing and in exercising these powers, the discretion of the Trustee shall be conclusive as to the advisability of any distribution of income or principal, and as to the person to or for whom such distribution is to be made, and same shall not be subject to judicial review.
2019 Agreement, Article III(B)(2).
It also stated that the 2019 Agreement was prepared at the request of Plaintiff and contained the acknowledgement of each party to the agreement that such party had had the opportunity, before signing the Agreement, to seek separate independent legal counsel and tax advice.1 Id. § 4(B).
Plaintiff alleges that he was coerced into signing the 2019 Agreement. Compl. ¶ 34. At the time he entered into the agreement, Plaintiff wanted to buy a vacation home for himself and his wife and had requested a distribution of principal from the Jane David Trust to allow him to do so. Id. ¶35. John David allegedly refused to authorize the distribution unless Plaintiff would agree to sign the 2019 Agreement. Id. In addition, John David allegedly refused to fulfill his obligations as Trustee by failing to make income distributions to Plaintiff. Id. ¶ 36. He thus claims that since the Jane David Trust was his primary means of...
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