Schock v. Nash

• Decision Date: 16 June 1999
• Docket Number: No. 374, 1998.,374, 1998.
• Citation: 732 A.2d 217
• Parties: Irma SCHOCK, individually and as Guardian of the property of Anna Dever; Woldemar Schock, Amelia N. Schock and Angelina Minutola, Defendants-Below, Appellants, v. James V. NASH, Administrator with the Will annexed of the Estate of Anna M. Dever; and Thomas Jefferson University, Plaintiffs-Below, Appellees.
• Court: Supreme Court of Delaware

732 A.2d 217

Irma SCHOCK, individually and as Guardian of the property of Anna Dever; Woldemar Schock, Amelia N. Schock and Angelina Minutola, Defendants-Below, Appellants, v. James V. NASH, Administrator with the Will annexed of the Estate of Anna M. Dever; and Thomas Jefferson University, Plaintiffs-Below, Appellees.

No. 374, 1998.

Supreme Court of Delaware.

Submitted: May 17, 1999.¹

Decided: June 16, 1999.

Rehearing Denied July 16, 1999.

Victor F. Battaglia (Argued), and Philip B. Bartoshesky, Biggs & Battaglia, Wilmington, for Irma Schock.

Thomas Herlihy, III, Herlihy Harker & Kavanaugh, Wilmington, for Woldemar Schock, Amelia N. Schock and Angelina Minutola.

Charles E. Butler, Smith Katzenstein & Furlow, Wilmington, and Thomas H. Suddath, Jr. (Argued), Montgomery, McCracken, Walker & Rhoads, Philadelphia PA, for Thomas Jefferson University and James V. Nash.

Before VEASEY, Chief Justice, WALSH, HOLLAND, HARTNETT and BERGER, Justices (constituting the Court en Banc). HARTNETT, Justice.

In this appeal, we affirm the Court of Chancery's decision, after trial, that imposed a constructive trust and awarded restitution as to certain property of Anna M. Dever. The Court of Chancery found that the evidence was not sufficient to show that Ms. Dever intended that the durable power of attorney she executed authorized Irma Schock, the named attorney-in-fact, to make gratuitous transfers of Ms. Dever's property to Irma and her family. We hold that Irma breached her fiduciary duty of loyalty and AFFIRM.

I. Facts and Procedural History

This action arises from a dispute as to the ownership of Anna M. Dever's property that, prior to her death, was transferred by her attorney-in-fact, Irma Schock, to herself and her family. If not so transferred, the property would have passed to Thomas Jefferson University under Dever's will.

Anna Dever and Irma Schock were neighbors and first became friends in the late 1980s when Andrew Schock, who was Irma's son and Ms. Dever's paperboy, invited Anna Dever to dinner. At the time of the introduction, Ms. Dever was a single elderly woman with no close family of her own. She subsequently, regularly attended Sunday meals at the Schock's home. The Schocks assisted Ms. Dever in various ways, such as making minor house repairs and shopping. On several occasions the Schock family aided Ms. Dever by getting her medical treatment when they found her in her home unconscious as a consequence of her diabetes. Irma Schock also assisted Ms. Dever with her financial affairs.

On September 17, 1994, Ms. Dever executed a Durable Power of Attorney ("the 1994 POA")² on a printed form prepared by Wilmington Trust Company.³ It was a general grant of authority and listed powers in six numbered paragraphs.⁴ It also included an unnumbered paragraph that stated:

In consideration of the recognition of this Power of Attorney by said Wilmington Trust Company, and intending to be legally bound hereby, I/we hereby agree as follows: If said Attorney shall perform any act or acts herein authorized, after my/our death, bankruptcy, or the occurrence of any legal disability on my/our part (whether or not a decree has been issued), such act or acts shall be binding upon my/our personal representatives and my/our guardians, if any; I/we also agree, for my/our personal representatives assignees and guardians, if any, to indemnify and save harmless said Wilmington Trust Company from any loss or damage which it might sustain through relying upon the apparent authority of this power after its termination, by operation of law or otherwise; I/we do hereby expressly authorize and empower Wilmington Trust Company to permit my/our said Attorney to deal with, control, transfer to the name of said Attorney, or to the name of others, appropriate to his or her own use or to the use of others, and dispose of, any and all moneys, funds, accounts, Checks, Drafts, Notes, Bills of Exchange, other commercial paper, Certificates of Deposit or other Orders or instruments for the payment of money, bonds, stocks, and other securities, or any and all other property whatsoever, tangible or intangible, which may belong to me/us or in which I/we may have any interest, to the same full and unlimited extent and in the same manner as my/our said Attorney might or could do, if the same were his or her absolute property, hereby expressly authorizing my/our said Attorney to deposit my/our funds in his or her personal account, and I/we agree that Wilmington Trust Company shall not in any manner or for any cause be liable for any disposition which my/our said Attorney may make of the same or any part thereof.

Irma Schock, the named attorney-in-fact, claims this paragraph gave her the power to gratuitously transfer substantially all of Ms. Dever's property to herself. At the time she executed the power of attorney, Ms. Dever also changed the name on her individual checking account in Wilmington Trust Company to "Anna Dever and Irma Schock as joint tenants with right of survivorship."⁵ As will be discussed, before Ms. Dever's death, Irma Schock transferred most of the principal's property to herself or her family. This led to this suit being filed by the University and James V. Nash, the Administrator of the estate of Anna M. Dever (collectively "the Plaintiffs"). The suit challenges transfers made by Irma Schock to herself and her family.

Plaintiffs named as defendants Irma Schock, individually and as Guardian of the property of Anna M. Dever, Woldemar Schock, Amelia Schock and Angelina Minutola⁶ (collectively "the Schocks") alleging that Irma Schock breached the fiduciary duties she owed to Dever as her attorney-in-fact because she improperly made gratuitous transfers to herself and her family. Plaintiffs asserted that all the Schocks had been unjustly enriched and therefore hold the proceeds of the inappropriate transfers in constructive trust for the University's benefit.

Anna Dever's Last Will and Testament, executed in 1971, named the University as the residual beneficiary of her estate. It had been her and her parents' long-time wish to establish a scholarship for needy medical students. The will named Ms. Dever's now deceased mother as primary beneficiary and the University as a contingent beneficiary if her mother did not survive her. Evidence was offered at trial that Ms. Dever had considered changing her Will to make Irma and Woldemar Schock the primary beneficiaries of her estate. At trial, Babe Giacoma, Ms. Dever's long-time friend, testified that Anna retitled her bank account to facilitate Irma Schock's ability to handle her finances and to make a gift of any funds left in the account after her death to Irma. Ms. Giacoma also testified that in 1994, Ms. Dever had considered drafting a new will with Irma and Woldemar Schock as the primary beneficiaries. At that time Ms. Giacoma was an employee of the New Castle County Register of Wills Office and advised Ms. Dever that she could use a power of attorney and joint accounts with right of survivorship to dispose of her estate. Ms. Dever never formally changed her will, but did execute the 1994 POA without any advice from an attorney.

On May 10, 1995, Anna Dever was admitted to the hospital. Attorney John Weaver testified by deposition that he visited Ms. Dever on May 18, 1995 and she instructed him to draft a new will naming Irma and Woldemar Schock as the primary beneficiaries and the University as contingent beneficiary. On May 20, 1995, Ms. Dever slipped into a semi-conscious state and never formally changed her will. For purposes of this case, the parties agree that Ms. Dever lacked the legal capacity to manage her affairs after May 20, 1995.⁷ Irma Schock was appointed guardian of Anna Dever's person and property by the Court of Chancery on August 11, 1995 after she discovered that Ms. Dever had two inconsistent "living wills." Anna M. Dever died on August 18, 1995.

The University was the sole beneficiary under Ms. Dever's unrevoked 1971 Will. Under the will, the University received Ms. Dever's home which was ultimately sold for approximately $108,000. The University alleges that the various transactions by Irma Schock reduced the assets in Ms. Dever's estate that it would have otherwise been entitled to receive as the sole beneficiary of her will. It is undisputed that after Ms. Dever became incapacitated, Irma liquidated all of Ms. Dever's stocks and a $5,000 Wilmington Savings Fund Society certificate of deposit and also transferred a $15,000 annuity from Great Northern Insured Annuity Corporation that named the University as beneficiary to a Penn Mutual annuity with Irma's daughter, Amelia, as the new beneficiary.

The proceeds from the stocks of Ms. Dever sold by Irma were approximately $144,722 and were placed into the Wilmington Trust joint bank account of Ms. Dever and Irma. Irma then wrote several checks and withdrew over $6,126.26 from this joint account to pay her personal and family expenses.⁸ Between June 6 and June 27, 1995, Irma used approximately $140,000 from the joint account to purchase mutual funds in the joint names of herself and Anna M. Dever. On August 23, 1995, five days after Ms. Dever's death, Irma changed the title on the mutual fund accounts to show that they were jointly owned by her and her mother, Minutola. Irma testified at trial that she caused the mutual funds to be titled jointly with herself and her mother, without Minutola's knowledge, in order to take advantage of a lower taxable income base. At trial the Plaintiffs asserted that Irma liquidated approximately $20,000 in the mutual funds and gave the money to her husband, Woldemar, to be used in his business.⁹

Amelia Schock received approximately $13,796 from the Penn Mutual annuity upon Dever's death. Amelia loaned that money to Woldemar Schock, her father, under the name of his business. It was used by Woldemar to purchase a 1994 Ford Thunderbird that Amelia took with her to...