Court Opinion

ID: 4318616
Source: CourtListenerOpinion
Date Created: 2018-10-05 15:09:50.369627+00
Date Added: 2024-06-11T14:45:24.582044
License: Public Domain

COURT OF CHANCERY
                                     OF THE
                               STATE OF DELAWARE
PATRICIA W. GRIFFIN                                                   CHANCERY COURTHOUSE
MASTER IN CHANCERY                                                         34 The Circle
                                                                   GEORGETOWN, DELAWARE 19947

                         Final Report:        October 1, 2018
                        Date Submitted:      September 28, 2018

Craig A. Karsnitz, Esquire                 Eugene H. Bayard, Esquire
Young Conaway Stargatt & Taylor            Morris James Wilson Halbrook & Bayard
110 West Pine Street                       107 West Market Street
PO Box 594                                 PO Box 690
Georgetown, DE 19947                       Georgetown, DE 19947

Penny West
32172 Roxana Road
Ocean View, DE 19973

RE:      Estate of Harold E. Marvel
         Register of Wills Folio No. 152

Dear Counsel and Ms. West:

         Pending before me are exceptions to the final accounting for an estate. The

exceptant claims that the accounting fails to account for the full value of the

decedent’s farming business, which the exceptant asserts the decedent owned as a

sole proprietorship, and for funds in the decedent’s personal bank account, which

she alleges was a convenience account, among other issues. The executrix denies

all of the claims, responding that the farming business was a closely held

corporation in which the decedent was a minority interest holder, that the

decedent’s interest was properly valued, and the bank account was a joint account
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

and not a convenience account. The purported majority owner of the farming

business took similar positions as those taken by the estate related to the business.

For the reasons set forth below, I conclude that the farming business was a

corporate entity which, given the circumstances, was not improperly valued by the

estate.      I also conclude the bank account was a convenience account and

recommend that the estate’s first and final accounting be adjusted accordingly.

This is a final report.

    I.    Background
          Harold Marvel (“Harold”) died on March 22, 2013, leaving four surviving

children – Penny West (“Penny” or “exceptant”), Donna Sue McInnis (“Donna” or

“executrix”), Rolland Marvel, Sr. (“Rolland”), and Vicky Andrews.1 Harold’s Last

Will and Testament (the “Will”) was executed on October 8, 2012 and gives

specific bequests to Rolland (life interest in a farm referred to in the Will as the

“garage property,” fixtures and equipment on that property, and all farm machinery

and vehicles) and jointly to Harold’s daughters (haying equipment, the home

property, and the remainder interest in the garage property), among other bequests.

He names his four children as residual beneficiaries of his estate.2 The Will does

1
    I use first names in pursuit of clarity and intend no familiarity or disrespect.
2
    Tr. Ex. 32.

                                                 2
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

not mention Beaver Dam Farm, Inc. (“BDF”), a corporation Harold established in

1988 related to his farming business.

         Letters of testamentary were issued to Donna as executrix of Harold’s estate

(the “Estate”) on April 18, 2013. The inventory for the Estate was filed on

September 18, 2013, and an amended inventory on January 8, 2014.                Both

inventories listed Estate property as including the garage property, with Rolland

receiving a life interest in the garage property and Donna, Penny and Vicky each

having a one-third remainder interest in the garage property; a home property, with

the three daughters having a one-third interest in that property; a 49% interest in

Beaver Dam Farm, Inc. (valued at $70,395.58); money from an insurance check;

and farm and haying equipment.3 The amended inventory listed Harold’s PNC

bank account as joint property with Donna, while the original inventory listed it as

Estate property. The Estate’s First and Final Account (the “accounting”) was filed

on May 15, 2014.4

         Penny filed exceptions to the accounting on July 29, 2014, claiming that all

proceeds in the BDF bank account at Harold’s death were Estate property because

Harold was the sole proprietor of the farming business since BDF was defunct at

3
    Tr. Exs. 1, 2.

                                           3
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

the time of his death; proceeds from BDF’s 2013 winter crops, 2013 fall crops, and

its 2014 winter wheat crop should be included as part of the Estate; electric bills

for the garage property were improperly paid by the Estate; a $3,200 commission

should not be paid to the executrix; Harold’s personal bank account was a

convenience account and not a joint account with Donna; and Harold’s personal

cars (and a four digit Delaware license tag) were part of the residuary estate.

        BDF responded to the exceptions on October 8, 2014 and denied that it was

defunct since, although its charter was revoked for failure to pay franchise taxes in

March 2012, BDF was revived on August 8, 2014 negating its prior void status.5

BDF also claimed Harold owned 49%, and Rolland 51%, of BDF stock. Further, it

asserted that BDF’s only asset was its bank account and the executrix and Rolland,

the majority owner, agreed that the Estate would receive 49% of the bank account

for its interest in BDF. Donna’s October 10, 2014 response to the exceptions

echoed BDF’s responses. Donna also stated that the Estate did not pay any garage

property electric bills, the executrix’s commission was justified, Harold’s personal

bank account was a joint account created with Donna, and Harold intended to

4
  The accounting included the total probate assets as stated on the Amended Inventory
(adding additional farm equipment, credits and refunds), and subtracting debts, and
providing for a $3,200 commission for the executrix. Tr. Ex. 3.
5
  Revival under 8 Del. C. § 312(e) means that the corporation is treated as if the
certificate of incorporation had “at all times remained in full force and effect.”

                                          4
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

devise all of his vehicles and tags to Rolland. The trial on the exceptions was

originally set for February of 2016, but was continued twice, once at Donna’s

request and once at Penny’s request. On May 19, 2017, the Court wrote to the

parties requesting a status report because it was unaware of any case activity since

the previous May. Penny’s counsel (who withdrew as counsel at that time) and

Penny both responded, with Penny requesting a hearing. In July of 2017, Donna

and Rolland filed motions to dismiss for failure to prosecute under Court of

Chancery Rule 41(e). After briefing, those motions were denied.6 Additional

discovery ensued, a hearing on the exceptions was held on April 10, 2018, and

simultaneous post-trial memoranda were submitted by the parties on May 10,

2018. In response to my letter dated August 8, 2016, Donna and Rolland filed

additional submissions on September 7, 2018, and Penny provided comments on

September 24, 2018. This is my final report.

II.      Analysis
         Court of Chancery Rule 198 specifies the burden of proof in exceptions to an

account.7 Once exceptions are filed in compliance with Rule 198, the burden of

proof falls on the executrix to demonstrate that the accounting was properly

6
 Denial of those motions was recommended in a Master’s Final Report dated October
25, 2017, which was adopted by the Court on November 7, 2017. Docket Item (“D.I”) 50;
D.I. 53.
7
    Ct. Ch. R. 198.

                                           5
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

prepared.8 That burden shifts, however, where the exceptant seeks a surcharge. In

those instances, the exceptant “must demonstrate affirmatively that a surcharge is

warranted.”9 Exceptions are addressed by issue below.

         A. Status and ownership of Beaver Dam Farms, Inc.
         Penny argues that BDF was defunct at Harold’s death and, since there was

no corporate entity, BDF was a sole proprietorship owned by Harold and all BDF

assets should be included in the Estate.10 The Estate and BDF claim that, although

BDF was void at the time of Harold’s death, it was subsequently revived and that

revival eliminated its previous void status.           It is undisputed that BDF was

incorporated in Delaware in March of 1988; that BDF’s certificate of incorporation

became void multiple times over the years for failure to file the State of Delaware

annual franchise tax reports and/or franchise taxes; and that BDF’s certificate of

incorporation was revived on three separate occasions.11 Delaware law provides

8
  In re Estate of Stepnowski, 2000 WL 713769, at *1 (Del. Ch. May 2, 2000) (this
“burden of proof reflects the fact that the administrator of the estate stands in a fiduciary
capacity to the beneficiaries”); see also In the Matter of Estate of Rich, 2013 WL
5966273, at *1 (Del. Ch. Oct. 29, 2013).
9
    In re Estate of Stepnowski, 2000 WL 713769, at *1 n. 1.
10
   Penny points to Harold’s failure to reference BDF in his Will, his use of the BDF
business banking account for personal purposes, and the lack of complete financial
records for BDF to support her claim that BDF was not a corporation.
11
  Tr. Ex. 35. Based upon records of the State of Delaware’s Division of Corporation,
BDF’s certificate of incorporation was issued on March 5, 1988, and revived after
becoming void on February 6, 2006, March 19, 2010, and August 8, 2014. Tr. Ex. 26.

                                              6
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

that the revival of a voided certification of incorporation has “the same force and

effect as if its certificate of incorporation had not been . . . void.”12 Such revival

validates actions performed by the corporation during the time when the certificate

of incorporation was void, and all property that belonged to the corporation when

the certificate of incorporation became void (which was not disposed of prior to its

revival) is “vested in the corporation, after its revival.”13             Although BDF’s

certificate of incorporation was void at the time of Harold’s death, it was

subsequently revived in August of 2014.14 With that revival, under Delaware law,

BDF was treated as if its certificate had not been voided and BDF retained its legal

corporate status through Harold’s death. Therefore, BDF was not “defunct” at the

time of Harold’s death and Harold was not the sole proprietor of BDF at that time.

        And, BDF and the Estate assert that Harold owned 49%, and Rolland owned

51%, of BDF. Penny claims that Rolland has not proven his 51% ownership of

12
  8 Del. C. § 312(e); see Wax v. Riverview Cemetery Co., 24 A.2d 431, 436 (Del. Super.
1942) (non-payment of taxes forfeits the corporation’s right to do business while it is
void, but “does not extinguish the corporation as a legal entity”).
13
   Wax, 24 A.2d at 436; see Kostyszyn v. Martuscelli, 2015 WL 721291, at *2 (Del.
Super. Feb. 18, 2015) (the certificate instituting the revival “retroactively validated all of
[the corporation's] actions taken during the time period the corporation was void”);
Kinney v. McKinney's Transmission Serv., Inc., 1980 WL 333071, at *1 (Del. Super. Jan.
9, 1980).
14
   BDF’s status was listed as “void” as of March 1, 2012. Tr. Ex. 35. Effective August 6,
2014, BDF’s certificate of incorporation was revived or renewed and taken out of “void”
status. Tr. Ex. 26.

                                              7
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

BDF. No documentary evidence showing the distribution of BDF’s shares or

ownership has been presented. It is undisputed that Rolland and Harold farmed

together for close to 50 years.15 Wilmer Powell (“Powell”), who was described as

a trusted friend of Harold, testified in his deposition that he was “instrumental” in

Harold’s establishment of BDF in 1988 and prepared tax returns for BDF for

approximately three years.16 Powell also testified that BDF was a “family

corporation” with “a father and son ownership of the stock.”17 He further stated

that Rolland owned 51% and Harold 49% of BDF stock and that distribution was

based upon legal advice that Harold should not be a majority shareholder because

of Harold’s financial difficulties.18 Indeed, Rolland testified that he understood he

was made majority shareholder of BDF because of his father’s financial problems

back in 1988.19

15
  Rolland testified that he left school in the 11th grade to farm full time with his father.
Trial Tr. 177: 11-24.
16
  Tr. Ex. 36, Powell Dep. Tr. 6: 24-25; 13: 19 - 14: 5. Powell’s deposition occurred on
May 12, 2016. His deposition testimony was admitted as evidence under the hearsay
exception for unavailable declarant since Powell died before the trial, and Penny’s former
counsel had been present and had the opportunity to elicit his testimony at his deposition.
D.R.E. 804(b)(1).
17
     Tr. Ex. 36, Powell Dep. Tr. 7: 4-9.
18
   Id., Powell Dep. Tr. 7: 10-13; 8: 22 - 9: 10. Those financial difficulties eventually led
to Harold declaring bankruptcy in the early 1990s. Id., Powell Dep. Tr. 6: 11-13.
19
     Trial Tr. 180: 22-23.

                                             8
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

         Rolland’s wife, Paula Marvel (“Paula”), and his son testified at trial that

Harold had stated that BDF was jointly owned by Rolland and him, with Rolland

owning a majority interest.20 Rolland testified that both Harold and Powell told

him that he owned 51% of BDF.21 BDF was a closely held family corporation that

did not adhere to corporate formalities and its operations, including Harold’s use of

business funds for his personal purposes, reflected the personal dynamics of the

relationship of its two shareholders, a father and son. Harold, as president of BDF,

managed the farming business and Rolland followed his lead and was paid wages.

BDF’s management and compensation does not prove that Rolland did not have a

majority interest in BDF. I find sufficient evidence was presented to show that

Rolland held a 51% interest in BDF, and Harold held the remainder.

         B. Value of Beaver Dam Farms, Inc.

         In this case, the Estate’s share of Harold’s 49% interest in BDF was valued

at $70,395.58,22 or 49% of the funds in the BDF bank account at the time of

Harold’s death. Penny argues that the Estate’s interest in BDF was improperly

valued, and that BDF’s interest in the 2013 winter crops, 2013 fall crops and 2014

20
     Trial Tr. 93: 8-15; 149: 14 - 150: 5.
21
     Trial Tr. 179: 13 - 180: 1.
22
   BDF paid $5,405.82 on Harold’s funeral bill, which was a debt of the Estate. When
that amount was subtracted from $70,395.58 (representing 49% of the BDF bank
account), the final amount paid to the Estate for its share of BDF was $64,989.76.

                                             9
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

winter crops were not accounted for in that payment. BDF asserts that the typical

approach the Court of Chancery uses in valuing a corporation is the capitalization

of earnings method.23 But, it also alleges that BDF’s lack of records and record

keeping would limit a forensic accountant’s ability to value BDF.24 And, that BDF

lost money and had no earnings to capitalize, so the amount the Estate received for

its share of BDF exceeded the value of Harold’s interest. Further, BDF argues that

the sale of Harold’s interest would “necessarily require a minority discount,” and

the Estate’s interest in BDF would have to be reduced to reflect that discount.25

Penny expressed her belief that the limited financial information provided by BDF

was not accurate and that correct information would show a profit.26

           There are a number of approaches to valuing an interest in a closely held

corporation for purposes of “cashing out” a shareholder. Valuation of corporate

shares is “not a mechanical or rigid endeavor” and centers on ensuring that the

23
  BDF cites Reis v. Hazelett Strip-Casting Corp., 28 A.3d 442, 469 (Del. Ch. 2011), and
Gonsalves v. Straight Arrow Publishers, Inc., 793 A.2d 312, 319 (Del. Ch. 1998), aff'd in
part, rev'd in part, 725 A.2d 442 (Del. 1999), in support of using the capitalized earnings
method for valuing businesses.
24
     D.I. 82, at 10.
25
     Id.
26
     D.I. 92.

                                            10
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

shareholder receives the “fair or intrinsic value of his shares.”27 Courts have

recognized that “certain characteristics of family-owned or closely-held

corporations make valuation of a stockholder's interest difficult.”28

         The problem with valuing BDF in this case is that there is very limited

financial information available about BDF. As suggested by BDF, the capitalized

earnings method is one approach that has been used by this Court in determining

the fair value of the corporate shares, “especially for companies with significant

intangible assets and few fixed assets.”29 To rely on that method, “two basic inputs

[are required]: a measure of the company’s earnings and a capitalization rate.”30

The information needed to use the capitalized earnings valuation method is not

available in this case.

         It is undisputed that BDF operated as a small family business in every sense

– one in which Harold, the father, was the decision-maker and Rolland, the son,

27
  Walter W.B. v. Elizabeth P.B., 462 A.2d 414, 415-16 (Del. 1983); see Cavalier Oil
Corp. v. Harnett, 564 A.2d 1137, 1142-43 (Del. 1989) (discussing considerations for
determining the “fair value” of the company's outstanding shares under Delaware's
appraisal statute, 8 Del. C. § 262, for minority shareholders dissenting from a cash-out
merger).
28
  Petition of B & F Towing & Salvage Co., Inc., 551 A.2d 45, 49 (Del. 1988) (citation
omitted).
29
     Gonsalves, 793 A.2d at 319 n. 18.
30
   The capitalization rate is obtained through a comparison with similar publicly traded
companies whose market capitalization and earnings measures are publicly disclosed. Id.
at 319.

                                          11
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

helped to effectuate those decisions. I also recognize that, at this point – five years

after Harold died – it would be difficult, if not impossible, to develop reliable

financial records for BDF sufficient for experts to effectively perform a valuation

of the business.31 Given the limited information available, I conclude the Estate’s

interest in BDF should be valued based upon its proportional share of BDF’s

assets.

        BDF had limited assets – at the time of Harold’s death, it had $143,664.45 in

its checking account and did not own any real property or farm equipment. 32 Post-

trial, I offered the parties the opportunity to submit additional information to assist

in the valuation determination. BDF submitted income and expense information

for the period of March 22, 2013 to June 18, 2014. Considering BDF’s earnings

over that period (which is the only earnings information provided), it appears

BDF’s income approximated its expenses.33             This information provides some

31
   Post-trial, BDF supplemented the record with an expert valuation of BDF, which stated
that it is likely cost prohibitive to reconstruct BDF’s missing financial records, and the
“lack of complete financial records precludes the determination of [BDF’s] assets and
liabilities,” making it “very difficult, if not impossible, to accurately determine the fair
market value of [BDF].” D.I. 88, Ex. Aff. of Charles H. Sterner, Jr., CPA, CVA
[hereinafter “Sterner Aff.”] ¶ 4.
32
  The evidence indicated that Harold kept the farming equipment and property in his
name and treated that equipment as if it was his (devised it through his will).
33
  BDF’s income during that period totaled approximately $328,401.70. See id., Ex. Aff.
of Paula J. Marvel [hereinafter “Marvel Aff.”]. This amount includes monies received
for a loan payback from a business associate and an insurance refund which BDF
excluded from its income calculation but I conclude should be considered income. Based
                                            12
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

insight into BDF’s general financial condition (which did not appear to be strong at

that time), but it is not particularly useful in valuing the Estate’s share since it

covers the time period following Harold’s death, rather than before his death, and

is limited in scope.

         At the time of Harold’s death in March 2013, BDF’s winter crops were in

the ground – they had been planted between October and December of 2012 and

were harvested in June or July of 2013.34 Any profit from those crops should,

proportionately, be included as part of BDF’s assets for the purpose of valuing the

Estate’s share of BDF. However, the evidence does not indicate that those crops

were profitable. The record shows that revenue from the 2013 winter crops was

approximately $36,899.09, and expenses associated with producing those crops

were comparable.35

upon the information provided, I determine BDF’s total expenses during that period to be
approximately $330,535.98. To calculate that total, I subtracted out expenditures for
Harold’s funeral, county property taxes (since BDF does not own any land), and the pay-
out to the Estate for Harold’s share. It appears that some of Harold’s personal expenses
were paid out of the BDF business account, although they are debts of the Estate. But,
the financial records concerning Harold’s personal expenditures are not sufficient to
make appropriate adjustments in BDF’s finances. And, Rolland, BDF’s majority interest
holder, has not expressed any objection to his father’s expenditure of BDF’s funds.
Given these considerations, I decline to attempt to realign Harold’s personal expenditures
out of BDF funds. I note, however, that Harold’s funeral costs ($5,405.84) were
realigned, when the Estate reimbursed BDF for its payment of those expenditures.
34
     Trial Tr. 77: 5-11; 78: 3-9.
35
  Winter wheat was sold to Mountaire Farms (“Mountaire”) in BDF’s name on June 28
and 29, 2013 and July 15, 2013 for $31,397.76, and barley was sold to Perdue in BDF’s
                                           13
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

        Although Penny asserts that revenue associated with later BDF crops should

be considered in valuing the Estate’s share of BDF, I do not find it fair to consider

name on June 24, 2013 for $5,501.33. See Tr. Exs. 11, 12. In its supplemental
information, BDF indicated that the 2013 winter crop income was $36,903.09, but did not
provide supporting documentation. See D.I. 88, Marvel Aff. Given the minimal
difference ($4) and the lack of supporting documentation for BDF’s income calculation, I
will use $36,899.09 as the total income for BDF’s 2013 winter crop. Expenses associated
with the 2013 winter crops provided by BDF in its supplemental information totaled
$33,324.99, when documented expenditures for seed, fertilizer and fungicide treatments,
Rolland’s wages in planting and harvesting the crops, and tractor fuel are included. See
id. Marvel Aff. If equipment rental costs were added in, BDF calculated the 2013 winter
crops’ expenses at $42,248.90, not counting the rental costs for land BDF leases to grow
crops. Id. I decline to include equipment rental costs, since the equipment used was
owned by Harold (before his death) and Rolland (after Harold’s death) and there was no
evidence that BDF actually paid for its usage. BDF indicated that the average land rent it
paid in 2012 – 2013 was $50 per acre and that winter crops were planted on 180 acres,
which would indicate a cost of $9,000 over the two-year period, or approximately $4,500
each year. Id. BDF also stated that, on some of the land, a summer crop of beans is
harvested after the winter crop, which would reduce land costs associated with the winter
crops. Without more information, it is impossible to make conclusive determinations as
to exact expenses associated with the 2013 winter crops; however, based upon the
evidence, I find it reasonable to conclude that BDF’s income for the 2013 winter crops
did not exceed its expenses associated with those crops, except by a minimal amount. In
her supplemental letter, Penny questioned including invoices for fertilizer and fungicide
treatments occurring before Harold’s passing. D.I. 92. Those treatments appear to have
occurred when BDF’s 2013 winter crops would have been the only crops in the ground,
so it is reasonable that those treatments constitute expenses for the winter crops. Penny
also complained that income received for winter crops in 2013 under Rolland’s name
should have been allocated to BDF and, with that income, winter crops would have
shown a profit. Id. Rolland farmed under both BDF and his own name, and he and BDF
separately received income from Mountaire for winter crops in 2013. Tr. Ex. 11.
Although Penny claims Rolland kept BDF income as his own, there is no evidence to
prove that allegation. Records show that crops taken to Mountaire were labeled as either
BDF’s or Rolland’s, and the seed invoices provided by BDF for those crops were in
BDF’s name. See Tr. Ex. 11; D.I. 88. And, Rolland and Paula’s 2013 federal tax return,
which was admitted into evidence, shows farming income for Rolland individually. Tr.
Ex. 28(A).

                                           14
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

earnings from crops grown in the fall of 2013 or winter of 2014, after Harold died.

Not only is revenue and expense information about those crops not readily

available in the record, but no investments had been made in those crops (or

expenses incurred) at the time of Harold’s death. Following Harold’s death, BDF

operations fell solely on Rolland, and not on the Estate, so the Estate’s investment

in those crops, and rights to profit from those crops, have not been proven.

         BDF argues that a minority discount should be applied in determining the

value of the Estate’s share of BDF, a closely held corporation. Its expert valuation

stated that “[v]alues of closely held securities usually include discounts for lack of

marketability,” which are determined based upon “[v]arious empirical studies.”36

And, that it is not uncommon for minority discounts to range from 10-40%, which

“severely and negatively” impact the value of minority interests in closely held

entities.37 However, no information or studies have been provided to show that a

specific minority discount is warranted in this case. The general circumstances

appear to indicate that Harold’s minority interest would likely be discounted but,

without supporting information, I do not find a basis for applying such a discount.

         In summary, I conclude, in this case, the approach to fairly valuing the

Estate’s share in BDF is to divide BDF’s assets proportionally between its two

36
     D.I. 88, Sterner Aff. ¶¶ 5, 6.

                                         15
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

shareholders, Rolland and the Estate. This was the approach reflected in the

Estate’s accounting.38 The evidence shows that BDF’s only confirmed assets, at

the time of Harold’s death, were the funds in its banking account and its crops in

the ground. Since there is no evidence that those crops were profitable, the value

of the Estate’s share is its proportional share of BDF’s bank account. Sufficient

information on BDF’s finances is not available to rely on other valuation methods

used for closely held corporations, such as the capitalized earnings method, or to

apply a specific minority discount here. If the value is as BDF’s expert opined –

that the Estate’s interest in this case “is likely to be worth only what the majority

interest is willing to pay for it,” then that criteria has been met because Rolland

agreed to the proportional division of BDF’s bank account.39

          C. Harold’s personal bank account with Donna

          Penny argues that Harold’s PNC bank account (“PNC Account”) was a

convenience account and that the funds became part of the Estate at his death,

while the Estate asserts that it was a joint account with Donna and the funds passed

to her at Harold’s death. Bank records show that the PNC Account, which held

37
     Id., Sterner Aff. ¶ 6.
38
   I also find that the Estate’s reimbursement for BDF’s payment of Harold’s funeral
expenses as a part of this process was proper, since those expenses are clearly debts of
the Estate.
39
     Id., Sterner Aff. ¶ 7; Trial Tr. 183: 13 - 184: 14.

                                                 16
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

$9,036.93 at Harold’s death, was titled in the names of Donna, Harold and Jean

Marvel (Harold’s deceased wife).40

         A convenience account is created by the true owner of the funds when he

adds names of other persons on the account so that those persons can access the

funds in the account if the owner is incapacitated and the funds are needed for his

benefit.41 If the PNC Account was a convenience account in this case, Donna was

intended to have access to the account to make expenditures for Harold’s benefit,

but would not have the right to keep the funds at Harold’s death. If it was a true

joint tenancy, then the funds in the PNC Account passed to Donna and not to the

Estate.      The ownership of bank accounts as joint tenancies with right of

survivorship are not favored in Delaware and there is a rebuttable presumption that

the bank account is owned as tenants in common unless the person “makes [his]

intentions explicit in the language used to create title to the property” that he

intends to create a joint tenancy with right of survivorship.42 And, a transfer of

40
     Tr. Ex. 38.
41
     See IMO Estate of Barnes, 1998 WL 326674 (Del Ch. June 18, 1998).
42
   IMO Estate of Hall, 2014 WL 4948188, at *7 (Del. Ch. Oct. 2, 2014), adopted 2014
WL 4950090 (Del. Ch. 2014); Speed v. Palmer, 2000 WL 1800247, at *4 (Del. Ch. June
30, 2000) (joint tenancy “can only be created by clear and definite language not
reasonably capable of any different construction”) (citation omitted).

                                           17
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

property for no consideration between close family members, such as between a

parent and child, is “presumed to be a gift.”43

         The starting point in this analysis is the language in the bank documents: if

the financial document creating the PNC Account includes “clear and definite

language” showing that Harold intended to create a joint tenancy with right of

survivorship, then “parol evidence may not be admitted to vary the terms of the

instrument.”44 In this case, the PNC Account does not contain clear language

showing that Harold intended to create a joint tenancy with right of survivorship

with Donna. There is nothing on the signature card, or anything in the record

related to the bank documents, that shows Harold intended to – or knew that – he

was establishing a joint account when he added Donna. The bank information

indicates that Donna’s signature authorizes a “change in title” but fails to show

whether the account is a joint account or to provide additional information that

would elucidate Harold’s intent.

         Donna testified that PNC Bank confirmed the PNC Account’s joint status

when it closed the account and released the funds to her.45 Donna also testified

43
  IMO Estate of Hall, 2014 WL 4948188, at *7; Hudak v. Procek, 727 A.2d 841, 843
(Del. 1999).
44
   In re Estate of Gedling, 2000 WL 567879, at *6 (Del. Ch. Feb. 29, 2000) (citing Walsh
v. Bailey, 197 A.2d 331 (Del. 1964)).
45
     Trial Tr. 29: 8-12.

                                           18
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

that she was added as signatory on the PNC Account “sometime after her mother

died,” and that the only person who had written checks on that account prior to that

time was Harold.46 She further testified that she knew the funds were her father’s

money; she never used any of the funds in that account for her own personal use

during his lifetime, and that Harold “wanted [her] to have [the money] when he

was gone.”47

        I find the evidence does not show that Harold intended the PNC Account to

be owned in joint tenancy. Although the account was titled in Harold’s and

Donna’s names and Donna states that Harold told her the money would be hers at

his passing, other evidence indicates that all the funds in the account originated

from Harold and the account was only used to pay his bills. Donna was also

signatory on the BDF account for purposes of paying bills. Harold relied on

Donna to help pay bills for him, when needed, using his money. And, Harold’s

estate plan generally anticipated an equal division among his daughters for the

property they received. Accordingly, I conclude the PNC Account was a

convenience account, and was not intended by Harold to be a joint account with, or

46
   Trial Tr. 65: 13 - 66: 9. Donna also testified that Harold knew the difference between a
signatory account and a joint account because she was signatory on the BDF account and
owned the PNC Account jointly with her father. Trial Tr. 28: 21- 29: 7. However, the
BDF account information was not included as evidence so I cannot discern any
differences, or similarities, in those accounts.

                                            19
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

a gift to, Donna. The $9,036.93 in the PNC Account passed to the Estate at

Harold’s death.

         D. Executrix’s commission

         Penny alleges that Donna, executrix of the Estate, should not be paid a

$3,200 commission. The Estate responds that the commission is justified given

Donna’s efforts. With this issue, Penny is seeking a surcharge and the burden falls

on her to demonstrate that a surcharge is warranted.

         Court of Chancery Rule 192 addresses the issue of fees for personal

representatives of an estate, and states that, in determining the reasonableness of a

personal representative’s commission for administration of an estate, the Court

may consider the time spent by the personal representative, risk and responsibility

involved, the novelty and difficulty of questions presented, the skill and experience

of the representative, provisions of the will regarding compensation, comparable

rates for similar work and services in the community, the character and value of the

assets, the loss of business necessitated by acceptance of the administration, and

the benefits obtained for the estate by the administration.48

         The $3,200 commission paid to Donna represented less than 1% (.32%) of

the approximately $1 million Estate. Donna was responsible for compiling all bills

47
     Trial Tr. 28: 14-16; 44: 9-18.

                                          20
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

and receipts and otherwise ensuring that all Estate expenses were paid, took unpaid

time off work to address Estate issues. She traveled to the Estate’s lawyer’s office

more than a dozen times to work on estate matters; resolved legal matters related to

satisfaction of judgments and mortgages against Harold’s real estate; and has been

involved as the Estate’s representative in this litigation for over four years.49

Donna testified that she works in a local business’ office, so she has some

background in the type of work required for administering an estate. 50 Given all of

these factors, I find that Penny has not met her burden of showing that the $3,200

commission paid to Donna was unreasonable.

         E. Other exceptions

         Penny’s other exceptions relate to her claims that the Estate improperly paid

the electric bills for the garage property (in which Rolland has a life interest) and

that Harold’s personal cars should have passed through the residuary estate.

Donna denies that the Estate paid any electric bills for the garage property,

testifying that the electric bills paid were for the home property. 51 I do not find

48
     Ct. Ch. R. 192.
49
     Trial Tr. 23: 11 - 24: 2.
50
     Trial Tr. 42: 17 - 43: 23.
51
  Trial Tr. 22: 18 - 23: 5. The Estate account shows that three electric bills were paid for
three accounts on May 23, 2013 (for a total of $155.12) and on July 3, 2013 (for a total of
$113.32). Tr. Ex. 19. There was some question about how there were three meters on the
home property resulting in the multiple accounts but the evidence did not prove any
                                            21
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

there was evidence that the Estate improperly paid electric bills for the garage

property.

         The Will states that Harold left all of his farm machinery (other than his

haying equipment) and his vehicles to Rolland.              Vehicles are not addressed

otherwise in Harold’s Will.        Penny claims that Rolland was not supposed to

receive Harold’s personal vehicle or the four-digit Delaware tag.               There was

testimony that Harold stated that he “forgot” when making his Will and meant to

leave the car tag to Donna.52 Regardless of the testimony concerning Harold’s oral

statements that he made a mistake, his Will addresses his vehicles and cannot be

reformed to correct a mistake.53 Further, Donna testified that Rolland gave her the

car tag when she told him of Harold’s wishes.54 I find Harold’s personal car (and

improper payments on electric bills and the amounts were de minimis. See Trial Tr. 36:
13 - 37:8.
52
     Trial Tr. 31: 4-8.
53
   See, e.g., Miller v. Equitable Tr. Co., 27 Del. Ch. 282, 32 A.2d 431, 434 (1943) (the
intent in a will must be enforced, “if the expression is plainly discernible from the
language employed, and in such cases surrounding facts and circumstances can be of no
importance”); In re Will of Fleitas, 2010 WL 4925819, at *5 (Del. Ch. Nov. 30, 2010)
(“[i]f a mistake was made in the writing of the [will] ... this court has no power to correct
a mistake, and it cannot, by introduction of parol evidence, rewrite the [will]”) (citation
omitted).
54
     Trial Tr. 64: 18 - 65:4.

                                             22
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

the four digit Delaware license tag) were addressed in his specific bequest and

were not part of the residuary estate.

III.    Conclusion

        For the reasons set forth above, I find that BDF was a corporate entity at the

time of Harold’s death through the subsequent revival of its certification of

incorporation, and that Rolland held a 51% interest, and Harold held a 49%

interest, in BDF. I also conclude that Harold’s former share in BDF was fairly

valued through the proportional division of BDF’s assets, consisting of its bank

account, between its two shareholders, Rolland and the Estate.

        In addition, I find the PNC Account was a convenience account and was not

intended by Harold to be a joint account with, or a gift to, Donna, so the funds in

that account passed to the Estate at Harold’s death. Finally, I conclude the $3,200

commission paid to the executrix was reasonable, the Estate did not improperly

pay electric bills for the garage property, and Harold’s personal car and four-digit

Delaware license tag were not part of the residuary estate. I recommend that the

Court adjust the accounting to reflect that the $9,036.93 in the PNC Account

passed to the Estate at Harold’s death. This is a final report and exceptions may be

                                          23
IMO Estate of Harold Marvel
ROW Folio No. 152
October 1, 2018

taken pursuant to Court of Chancery Rule 144.

                                           Sincerely,

                                           /s/ Patricia W. Griffin

                                           Patricia W. Griffin
                                           Master in Chancery
PWG/kekz

                                      24