Court Opinion

ID: 9951165
Source: CourtListenerOpinion
Date Created: 2024-03-15 18:02:52.731466+00
Date Added: 2024-06-11T14:37:41.449073
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ROBERT C. CECIL,                    )
                                    )
             Petitioner,            )
                                    )
       v.                           ) C.A. No. 2023-0892-BWD
                                    )
RYAN C. CECIL, as Successor Trustee )
of the Cecil Residence Trust U/T/A  )
dated July 3, 2018,                 )
                                    )
             Respondent.            )

       ORDER DENYING MOTION TO DISMISS COUNTERCLAIMS

WHEREAS: 1

       A.    On August 31, 2023, petitioner Robert C. Cecil (“Petitioner”) initiated

this action through the filing of a Petition to Remove Successor Trustee, For

Accounting and Related Relief (the “Petition”). Pet. To Remove Successor Tr., For

Accounting And Related Relief [hereinafter, “Pet.”], Dkt. 1. The Petition alleges

that on July 3, 2018, Ruth E. Cecil and Richard C. Cecil (“Decedent”) executed a

Trust Agreement settling The Cecil Residence Trust dated July 3, 2018 (the “Trust”)

and    naming    their children—Petitioner       and    respondent Ryan        C. Cecil

(“Respondent”)—as well as their grandchildren—Roxanne Cecil and Eric Cecil—

1
  The following facts are taken from the Petition, the Counterclaims (defined below), and
the documents incorporated by reference therein. See Freedman v. Adams, 2012 WL
1345638, at *5 (Del. Ch. Mar. 30, 2012) (“When a plaintiff expressly refers to and heavily
relies upon documents in her complaint, these documents are considered to be incorporated
by reference into the complaint[.]” (citation omitted)).
as beneficiaries of the Trust. Pet. ¶¶ 1-8. The same day, Decedent executed a Last

Will and Testament (the “Will”) naming the Trust as the residuary beneficiary of his

estate. Id. ¶ 6. Decedent died on July 18, 2022, and on December 19, 2022,

Respondent executed a Change of Trustee Agreement, “us[ing] his position as the

father of two of the three beneficiaries to control three of the four votes to name

himself Successor Trustee for the benefit of him and his children.” Id. ¶¶ 15, 17.

Acting as Successor Trustee, Respondent then transferred real property owned by

the Trust in exchange for $1.65 million, distributing some proceeds to the

beneficiaries and holding the remainder in escrow. Id. ¶ 18. Count I of the Petition

asserts a claim for breach of fiduciary duty against Respondent; Count II demands

an accounting; Count III seeks Respondent’s removal as Successor Trustee; and

Count IV requests the imposition of a constructive trust. Id. ¶¶ 21-53.

      B.    On October 26, 2023, Respondent filed an Answer to Petition to

Remove Successor Trustee, Affirmative Defenses, and Counterclaims (the

“Counterclaims”).    Answer To Pet. To Remove Successor Tr., Affirmative

Defenses, And Countercls. [hereinafter, “Countercls.”], Dkt. 6. The Counterclaims

allege that by March 2020, Decedent “was suffering from serious cognitive deficits

such as dementia,” “was not capable of managing his own affairs,” “resided with

Petitioner,” and “was entirely dependent on Petitioner for his care and

companionship.” Countercls. ¶¶ 55-56. On July 5, 2020, Decedent sold his 2007

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Cadillac DTS (the “Vehicle”) to Petitioner for $3,495, simultaneously transferring a

three-digit Delaware license plate worth between $75,000 and $130,000 (the

“Plate”). Id. ¶¶ 57-59. Counterclaim I challenges that transaction (the “Transfer”)

on grounds of lack of capacity; Counterclaim II challenges the Transfer as the

product of undue influence; Counterclaim III asserts a claim for unjust enrichment;

and Counterclaim IV “seeks a declaratory judgment that no consideration was paid

for the Vehicle and Plate.” Id. ¶¶ 61-83.

      C.     On November 1, 2023, Petitioner moved to dismiss the Counterclaims

(the “Motion to Dismiss”). Dkt. 7. On December 8, 2023, Petitioner filed an

opening brief in support of the Motion to Dismiss. Pet’r/Countercl. Def. Robert C.

Cecil’s Op. Br. In Supp. Of His Mot. To Dismiss Countercls. [hereinafter, “OB”],

Dkt. 10. On January 16, 2024, Respondent filed an answering brief in opposition to

the Motion to Dismiss. Resp’t/Counterclaimant’s Ans. Br. To Pet’r/Countercl.

Def.’s Mot. To Dismiss [hereinafter, “AB”], Dkt. 11.        On January 31, 2024,

Petitioner filed a reply brief in further support of the Motion to Dismiss.

Pet’r/Countercl. Def. Robert C. Cecil’s Reply Br. In Supp. Of His Mot. To Dismiss

Countercls. [hereinafter, “RB”], Dkt. 13. Oral argument on the Motion to Dismiss

is unnecessary.

      NOW, THEREFORE, IT IS HEREBY ORDERED, this 15th day of March,

2024, as follows:

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      1.     Petitioner has moved to dismiss the Counterclaims for lack of standing.

“Where ‘the issue of standing is so closely related to the merits, a motion to dismiss

based on lack of standing is properly considered under Rule 12(b)(6) rather than

Rule 12(b)(1).’” Delta Eta Corp. v. City of Newark, 2023 WL 2982180, at *19 (Del.

Ch. Feb. 2, 2023) (quoting Appriva S’holder Litig. Co., LLC v. EV3, Inc., 937 A.2d

1275, 1280, 1286 (Del. 2007)). The Court “must determine whether the petitioner

has pled facts from which it may reasonably be inferred that she has standing to bring

her claims.” In re Corbett v. Corbett, 2019 WL 6841432, at *4 (Del. Ch. Dec. 12,

2019). When reviewing a motion to dismiss under Court of Chancery Rule 12(b)(6),

Delaware courts accept all well pleaded factual allegations as true and draw all

reasonable inferences in favor of the non-moving party. Cent. Mortg. Co. v. Morgan

Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 535 (Del. 2011).

      2.     Petitioner contends that Respondent lacks standing to challenge the

Transfer because he is neither a party to that transaction nor the administrator of

Decedent’s estate. See OB at 6-9; RB at 1-5. But as this Court has held, “[a]

petitioner has standing to challenge a fiduciary’s actions taken to the detriment of a

decedent’s estate where the petitioner has standing to challenge the decedent’s will.”

In re Corbett, 2019 WL 6841432, at *4 (holding that a petitioner who pled she was

both a testate and intestate beneficiary of the decedent’s estate “ha[d] standing to

bring not only [a] caveat action [challenging a will], but also to challenge

                                          4
Respondents’ actions [during his lifetime] that diminished Decedent’s estate”); see

also Hill v. Myers, 2020 WL 3171372, at *3 (Del. Ch. June 15, 2020) (holding that

the plaintiffs’ positions as both “the intestate heirs of the Decedent’s estate and the

intended beneficiaries of the Property under the Will” gave them “standing to pursue

claims against Defendant for her role in allegedly thwarting their interests” by selling

the decedent’s property during his lifetime “at a reduced value and in a way that

ensured the proceeds of the sale flowed to Defendant and her family” instead of to

the estate). The Counterclaims allege that Petitioner, acting in a fiduciary capacity,

facilitated a self-interested Transfer that diminished Decedent’s estate.           See

Countercls. ¶¶ 67-69. As the undisputed sole beneficiary under Decedent’s Will, the

Trust has standing to challenge the Transfer. And as Successor Trustee, Respondent

can bring that challenge on behalf of the Trust.

      3.     Petitioner suggests that this Court’s decision in Rambo v. Fischer

compels a different result. 2022 WL 4180890 (Del. Ch. Sept. 13, 2022), R. & R.

adopted sub nom. In re Orkin, 2022 WL 4549173 (Del. Ch.). See OB at 8; RB at 1.

It does not. In Rambo, the Court held that, although the Durable Personal Powers of

Attorney Act grants certain specified individuals standing to challenge transactions

effectuated by an agent acting under a power of attorney during a principal’s

lifetime, “[t]he power to bring challenges after the [principal]’s death rests solely in

. . . the executrix of the [principal]’s estate.” Id. at *6. Because the Transfer

                                           5
challenged in the Counterclaims was not made by an agent acting under a power of

attorney, that statutory interpretation does not apply.

      4.     Petitioner also contends that the Counterclaims are barred by the

equitable doctrine of laches. See OB at 9-14; RB at 6-9. “Statutes of limitations

traditionally do not apply directly to actions in equity, although courts of equity may

apply them by analogy in determining whether a plaintiff should be time-barred

under the equitable doctrine of laches.” Kraft v. WisdomTree Invs., Inc., 145 A.3d

969, 975 (Del. Ch. 2016). Looking to the three-year limitations period under 10 Del.

C. § 8106, Petitioner argues that the analogous statute of limitations here ran on July

5, 2023—nearly four months before the Counterclaims were filed on October 26,

2023. See OB at 12. Respondent counters that the statute of limitations was tolled

pursuant to 10 Del. C. § 8116, which states:

      If a person entitled to any action comprehended within §§ 8101-8115
      of this title, shall have been, at the time of the accruing of the cause of
      such action, under disability of infancy or incompetency of mind, this
      chapter shall not be a bar to such action during the continuance of such
      disability, nor until the expiration of 3 years from the removal thereof.

      5.     “Generally, whether equitable tolling applies raises a fact-intensive

inquiry that is not amenable to a motion to dismiss.” Riskin v. Burns, 2020 WL

7973803, at *16 (Del. Ch. Dec. 31, 2020). Here, the Counterclaims allege sufficient

                                           6
facts to support a reasonably conceivable basis for tolling under Section 8116. 2

Assuming the truth of those allegations, as I must, the limitations period was tolled

at least until Decedent’s death, on July 18, 2022. Using that date, the Counterclaims

were timely.3

       6.     Petitioner also points out that “the doctrine of laches also permits this

Court ‘to hold a plaintiff to a shorter period than [an analogous statute of limitations

at law] if, in terms of equity, the plaintiff should have acted with greater alacrity,

and when the plaintiff’s failure to seek equitable relief with alacrity threatens

prejudice to the other party.’” OB at 11 (quoting Whittington v. Dragon Gp., L.L.C.,

991 A.2d 1, 8 (Del. 2000)). Again, this analysis “is ‘not ordinarily well-suited’ for

treatment on a Rule 12(b)(6) motion.” Stewart v. Wilmington Tr. SP Servs., Inc.,

112 A.3d 271, 295 (Del. Ch. Dec. 31, 2020) (quoting Reid v. Spazio, 970 A.2d 176,

183 (Del. 2009)), aff’d, 126 A.3d 1115 (Del. 2015). Because it is not clear from the

2
  See Countercls. ¶ 55 (“Mr. Cecil was suffering from serious cognitive deficits such as
dementia. Mr. Cecil was not capable of managing his own affairs and resided with
Petitioner.”); id. ¶ 62 (“At the time the alleged transfer of the motor vehicle and license
plate were completed, Mr. Cecil’s mental and physical condition had been significantly
declining. Mr. Cecil was suffering from dementia at the time the documents were
executed.”); id. ¶ 63 (“Mr. Cecil lacked legal capacity to sign legal documents. Mr. Cecil
was unable to exercise thought, reflection, and judgment and did not understand what he
was doing and could not comprehend his actions.”).
3
   Separately, Petitioner contends that Respondent was on inquiry notice of the
Counterclaims by December 19, 2022, when he was appointed Successor Trustee, or May
8, 2023, when he sold Trust property. OB at 12-13. In either case, the Counterclaims
would not be time-barred under a three-year statute of limitations.
                                            7
face of the Counterclaims either that Respondent unreasonably delayed in asserting

the Counterclaims, or that Petitioner was prejudiced by any such delay, I conclude

that laches does not support a pleadings-stage dismissal of the Counterclaims.

      7.     For the foregoing reasons, the Motion to Dismiss is DENIED.

      8.     This order is a final report pursuant to Court of Chancery Rules 143 and

144. Exceptions to this and all other interlocutory reports in this action are stayed

under Court of Chancery Rule 144(f).

                                             /s/ Bonnie W. David

                                             Bonnie W. David
                                             Magistrate in Chancery

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