In re Doris J. Foster Inter Vivos Declaration of Tr., C. A. 2018-0589-PWG

CourtCourt of Chancery of Delaware
Writing for the CourtPatricia W. Griffin Master
PartiesIn the Matter of The Doris J. Foster Inter Vivos Declaration of Trust
Docket NumberC. A. 2018-0589-PWG
Decision Date21 November 2022

In the Matter of The Doris J. Foster Inter Vivos Declaration of Trust

C. A. No. 2018-0589-PWG

Court of Chancery of Delaware

November 21, 2022


Date Submitted: May 17, 2022

Draft Report: August 22, 2022

John J. Foster, Jr.

Raymond E. Tomasetti, Jr., Esquire Tomasetti Law, LLC

Patricia W. Griffin Master

Dear Mr. Foster and Mr. Tomasetti:

Pending before me is a petition for an accounting and related relief regarding a Florida trust. A trust beneficiary alleges that the co-trustees of the trust, who are also beneficiaries under the trust, improperly reduced his distributions from the trust and failed to provide trust accountings. After trial, I determine that the co-trustees did not furnish the required accountings to the beneficiary but that further remedy for an accounting is not needed. I also find that the smaller distributions to the beneficiary were justified, in part, under the trust's terms and due to the setoff of monies owed by the beneficiary to the trust. But, I conclude that the co-trustees did not fully comply with the trust's terms and, as a result, failed to give the beneficiary his full share. I recommend that the Court grant judgment in favor of the beneficiary in part, and against him in part, and impose a constructive trust

1

upon prior distributions made to the co-trustees under the trust to provide the beneficiary's full share. This is my final report.[1]

I. Background[2]

Doris J. Foster ("Settlor") executed the Doris J. Foster Intervivos Declaration of Trust ("Trust") on March 13, 1989.[3] The Trust was subsequently amended by the First Amendment of the Doris J. Foster Intervivos Declaration of Trust dated May 23, 1997;[4] completely amended and restated by the Doris J. Foster Intervivos Declaration of Trust dated January 28, 2000 ("Restatement");[5] amended by the Amendment of the Doris J. Foster Intervivos Declaration of Trust dated May 2, 2003 ("Second Amendment");[6] amended by the Amendment of the Doris J. Foster Intervivos Declaration of Trust dated January 6, 2005 ("Third Amendment");[7] amended by the Amendment of the Doris J. Foster Intervivos Declaration of Trust dated October 5, 2005 ("Fourth Amendment");[8] and amended

2

by Amendment to the Doris J. Foster Intervivos Declaration of Trust dated March 22, 2007 ("Fifth Amendment").[9] The Trust is a Florida trust and is governed by Florida law.[10] After Settlor's death (if her spouse does not survive her), the Trust provides that its assets will be distributed among Settlor's children - John J. Foster, Jr. ("John"), Caroline D. Wilt, Patricia S. Foster ("Patricia"), Mark A. Foster ("Mark"), Martha A. Conover ("Martha"), and Mary J. Cannon, subject to specified adjustments to John's and Patricia's shares.[11]

Settlor died on December 2, 2014.[12] Under the terms of Settlor's Last Will & Testament ("Will"), Settlor's estate largely passed to the Trust.[13] Under the Trust's terms, Martha and Mark were appointed successor co-trustees of the Trust upon Settlor's death.[14] Martha and Mark undertook the duties of winding up the

3

Trust and making distributions to themselves and the Settlor's other children.[15]Martha and Mark wound up the Trust at the end of 2016.[16]

On August 8, 2018, John filed the Petition for Accounting and other Relief ("Petition"), naming Martha and Mark as Respondents.[17] The Petition alleges that John did not receive an equal share of the distributions as required by the Trust and that Martha and Mark failed to provide information about the Trust to him.[18] The Petition seeks an accounting of the Trust and an equal distribution to John either from Trust funds or a surcharge against Martha and Mark.[19]

On August 31, 2018, Martha and Mark filed their Answer, contending that Settlor and her husband, John J. Foster, Sr. ("Father"), advanced considerable funds to John during their lifetime in the form of loans that were assigned to the Trust.[20] Martha and Mark indicated that, when making the Trust's final distribution, they set off the loans payable to the Trust from John's distribution.[21]

4

The parties then engaged in discovery.[22] John's attorney withdrew in October 2020.[23] This matter was scheduled for a hearing on multiple occasions and rescheduled due to COVID and John's repeated continuance requests.[24] Trial occurred in this matter on May 17, 2022.[25] I then issued a draft report on August 22, 2022, and no exceptions were filed.

II. Analysis

A. Accountings

Under the terms of the Trust, Martha and Mark were required to provide annual accountings to the beneficiaries after Settlor's death.[26] Additionally, under Florida law, the trustee of a Florida trust must keep the beneficiaries of a trust "reasonably informed of the trust and its administration,"[27] and "provide a trust

5

accounting … to each qualified beneficiary at least annually"[28] in the form of "a reasonably understandable report."[29]

The uncontroverted evidence presented at trial showed that Mark and Martha did not provide annual accountings. John testified that he did not recall receiving any information about the Trust's administration from Settlor's death until the Petition was filed.[30] Martha testified that she did not communicate with John regarding the administration of the Trust.[31] Thus, the evidence indicates that Martha and Mark did not fulfill this duty as trustees.

But, I find a further accounting remedy, as John has requested, is not warranted in this matter. Here, Martha and Mark provided John with the relevant

6

Trust information during discovery.[32] Because the requested remedy would provide no additional benefit beyond what was obtained through discovery, I recommend that the Court deny the requested relief of an accounting.[33]

B. Setoffs from John's Share of the Trust

In the Petition, John alleges that Martha and Mark made unequal distributions to him out of the Trust.[34] At trial, evidence was presented about two transactions that were set off against John's share of the Trust and led to an unequal distribution among beneficiaries - first, a $211,561.00 loan assigned to the Trust and, second, an adjustment related to an $100,000.00 advancement. I address each in turn.

1. The $211,565.00 Loan Assigned to the Trust

7

John executed a note ("Note"), dated November 1, 2006, in which he promised to repay monies loaned to him by Settlor and/or Father, along with interest at 5% per year.[35] It appears that Settlor or Father gave John $3,500.00 per month between November 2006 and April 2008 and $2,600.00 per month from May 2008 until about January 2011 under the Note.[36] John promised to pay the

8

loan (principal and interest) back in a balloon payment at (1) the death of both Settlor and Father "with the unpaid balance being deducted from the share of [John's] estate under the Will and or Trust of the last of the Lenders [Settlor or Father] to die," or (2) when John returned to gainful employment.[37] It is undisputed that John received the money, and John produced that he paid Settlor or Father back for the loan.[38] Settlor assigned the Note to the Trust on June 3, 2010.[39]When Martha and Mark were administering the Trust, they set off the amount of principal and interest due on the Note against John's beneficiary interest in the Trust.[40]

9

I consider whether, under Florida law, Martha and Mark were entitled to set off a beneficiary's debt to the Trust against that beneficiary's share of the Trust. "If the trustee holds a claim against the beneficiary he has a duty to collect it, and to use the beneficiary's interest in the trust as a source of collection."[41] Therefore, Martha and Mark were entitled to set off the loan debt that John owed to the Trust under the Note against John's share as a Trust beneficiary. Indeed, the Note shows that deducting the "unpaid balance" of the loan from John's share was explicitly agreed to by the parties.[42]

2. $100,000.00 Advancement

The Trust provides that, at Settlor's death, the remaining Trust assets will be split among Settlor's children, with John receiving a one-sixth share, subject to an adjustment. The adjustment provision for John's share provides:

(1) Adjustment to Share of John J. Foster, Jr. For purposes of this subsection, the term "adjustment amount" shall refer to (i) the sum of One Hundred Thousand Dollars ($100,000.00), less (ii) aggregate transfers relating thereto from JOHN J. FOSTER, JR. to [Settlor] and/or [Father] as of the date of the survivor of [Settlor or Father], with the difference between (i) and (ii) then being divided by
10
two (2). … The adjustment amount shall be subtracted from the share created for JOHN J. FOSTER, JR., and allocated equally among the shares created in Subsections (a) through (f) of this Section entitled "Division Upon Death", including the share created for JOHN J. FOSTER, JR.

("Adjustment Provision").[43] Martha and Mark believed that the Adjustment Provision addressed a loan, or monies provided in advance of Settlor's death, by Settlor to John.[44] Similar to his argument regarding funds paid under the Note, John asserts that the $100,000.00 was not an advancement but compensation for Father's improper use of funds from a separate trust.[45] Unlike the Note, however, there is no written documentation related to this $100,000.00.[46] Considering the evidence as a whole, I find that the $100,000.00 was likely an advancement but, regardless, the Trust provides for adjusting John's share based on that

11

$100,000.00.[47] Martha testified that, in determining John's share from the Trust, she and Mark distributed the Trust funds according to the Trust's terms as her "parents wanted [them] to do," and they argue that they complied with the Adjustment Provision in setting off the $100,000.00 advancement against John's beneficiary share so that John's share is equal "in a situation...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT