IN RE Estate of Bennie P. Farren

• Court: Court of Chancery of Delaware
• Decided: June 18, 2015
• Docket: CA 8714-MA CA 9385-MA
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE: ) Estate of Bennie P. Farren ) C.A. No. 8714-MA )

Patricia A. McGlaughlin, as Successor ) Trustee of the Hercules Living Trust and ) Beneficiary of the Hercules Living Trust, ) Petitioner ) C.A. No. 9385-MA v. ) ) Andrew P. Farren, as Executor of the ) Estate of Bennie P. Farren under the Will ) Of Bennie P. Farren, and in his individual ) Capacity, ) Respondent. )

MASTER’S REPORT

Date Submitted: February 11, 2015 Draft Report: December 9, 2014 Final Report: June 18, 2015

A decedent left his solely-owned residence in Laurel, Delaware and other

solely-owned assets to a trust. Under the terms of the trust, decedent’s lady friend

was granted a life estate in the residence and the funds necessary to pay the

monthly bills of the residence. Upon the lady friend’s death, her grandson was to

receive the residence free and clear of any trust, and any residue was to be divided

between decedent’s two sons. Under the terms of decedent’s last will and

testament, his brother was named executor and decedent’s son was named Page 1 of 15 successor executor. After the brother renounced his fiduciary appointment,

decedent’s son was granted letters testamentary by the Sussex County Register of

Wills.1 Thereafter, decedent’s ex-wife, who is the mother of his two sons, filed a

claim against the estate in the amount of $228,459.47, purportedly for past due

child support with interest thereon. The executor accepted the claim as a just debt

of the estate, and on July 10, 2013, filed a petition to sell the real property to pay

the decedent’s debts under 12 Del. C. § 2701. The lady friend objected to the

petition to sell, and filed a petition to remove the son as executor. For the reasons

that follow, I recommend in this final report that the son be removed as executor

for breach of his fiduciary duties, and that the petition to sell the real property

should be dismissed without prejudice.

I. BACKGROUND

The decedent, Bennie P. Farren, separated from his ex-wife, Rebecca

Courson, in the late 1970s, when his son Andrew was about four years old, and

Farren had no further contact with Andrew until Andrew was about 30 years old.2

Although he never remarried, Farren lived with Patricia McGlaughlin for nearly 30

1 I use first names to avoid confusion and repetition, and intend no disrespect by this practice. 2 Appendix to Opening Brief in Support of the Motion for Summary Judgment of Patricia A. McGlauglin, at 1-2 (Deposition of Andrew P. Farren at 4-8) (hereinafter “Appendix”). Page 2 of 15 years and had a close relationship with McGlaughlin’s grandson, Jared Smith.3

Farren met his own two grandsons only once about a year before his death, when

Andrew drove his family to Ocean Pines to show them the neighborhood where he

had lived as a child.4 Farren died on September 12, 2012. Andrew attended his

father’s funeral, but his brother Troy did not attend because he was in Europe on

business.5

After Andrew assumed the duties of executor of his father’s estate, he paid

Farren’s funeral bill, the estate attorney’s fees, and Farren’s property taxes.6 As

executor, Andrew rejected a claim for $4,254.13 plus interest for legal fees that

had been incurred by Farren in connection with a Child Support - U.S. Bankruptcy

Court Judgment Order dated May 17, 1990, and a Final Order of Custody and

Support in the Florida Circuit Court dated July 29, 1986.7 Andrew rejected this

claim because he thought the Florida attorney already would have written off the

loss on her books.8 Andrew accepted his mother’s claim of $228,459.47 for past

child support because, in his opinion, it was an outstanding debt that needed to be

3 Ex. A of Respondent’s Answering Brief, (Deposition of Patricia A. McGlaughlin at 26-27) (C.A. No. 9385-MA, Docket Item (“DI”) 19. 4 Appendix at 2 (Farren Deposition at 6-8), 5 Id. at 24 (Farren Deposition at 93-94). 6 Id. at 5 (Farren Deposition at 17-20). 7 Id. at 41 (Statement of Claim). 8 Id. at 13-14 (Farren Deposition). Page 3 of 15 paid.9 However, before he accepted this claim, on February 15, 2013, the estate

attorney, George B. Smith, Esquire, wrote a letter to McGlaughlin’s attorney, A.

Dean Betts, Jr., Esquire, stating: “We propose to accept and agree to [Courson’s

claim] unless you and your client agree to pay all the costs of opposing it.” 10 On

June 5, 2013, Smith wrote to Betts that the executor had decided to honor

Courson’s claim in the amount of $228,459.47, and his only option was to obtain a

court order to sell Farren’s former residential real estate to pay debts.11 Smith

continued: “Alternatively, [McGlaughlin] may forward funds sufficient to pay the

claim, or mortgage the property to generate cash. … If we don’t hear from you

[within ten days], we will proceed in Chancery.”12

Andrew filed a petition for sale of the real property on July 10, 2013.13

Attached to the petition was an estate inventory listing a total of $48,732.07 in

mortgages, notes, and cash owned by decedent at the time of his death, in addition

to the real estate improved by a single-family dwelling in Laurel, Delaware valued

at $176,000. The petition listed the following debts: (a) $13,920 in funeral

expenses; (b) $718.62 for Sussex County taxes; and (c) a claim in the form of a

9 Id. at 13 (Farren Deposition at 50-51); id at 28 (Farren Deposition at 109-110). 10 Id. at 31 (letter dated February 15, 2013, from George B. Smith, Esq. to A. Dean Betts, Jr., Esq.). 11 Id. at 36 (letter dated June 5, 2013, from George E. Smith, Esq. to A. Dean Betts, Jr., Esq.). 12 Id. 13 In re: Estate of Bennie P. Farren, Del. Ch., C.A. No. 8714-MA, DI 1. Page 4 of 15 judgment for past due child support in the State of Florida for $228,459.47. In

addition, the petition listed $6,479.98 in estate expenses that had already been paid.

On August 19, 2013, McGlaughlin objected to the petition to sell the real property,

contending that the only debt that could not be paid out of the liquid assets of the

estate was Courson’s claim, and this claim was not based upon a foreign

judgment.14 McGlaughlin alleged that the Courson claim was based instead upon

a certified copy of an “Arrearage Affidavit” issued by the Circuit Court of the

Ninth Judicial Circuit in and for Osceloa County, Florida purporting to show an

arrears balance of $24,300 as of January 18, 2013, and an “Affidavit of Child

Support and Interest Owed” prepared by a certified public accountant, which

contained double hearsay since the information on which the accountant had relied

was provided by Courson, whose information presumably came from the Florida

court.15

Thereafter, on Feb. 24, 2014, McGlaughlin filed a petition to remove

Andrew as executor of his father’s estate, alleging that Andrew breached his

fiduciary duty to the beneficiaries of the estate by failing to contest and resist

paying an unjust and unfounded claim against the estate.16 On March 20, 2014,

Andrew responded to McGlaughlin’s petition, alleging in part that McGlaughlin’s

14 Answer and Objection of Patricia A. McGlaughlin to Petition to Sell land to Pay Debts at ¶ 5, DI 6. 15 Id. Page 5 of 15 petition was superfluous, duplicative and a waste of judicial resources, since

McGlaughlin’s objections to the Courson claim were essentially identical to her

objections raised in the other case (C.A. No. 8714-MA).17 On April 15, 2014, the

parties filed cross-motions for summary judgment in C.A. No. 8714-MA.18 On

July 15, 2014, McGlaughlin moved for summary judgment in C.A. No. 9385-

MA.19

Following briefing on the motions, oral argument took place on December 9,

2014, during which Andrew’s counsel conceded that the accountant should not

have compounded interest monthly on the child support arrears.20 I issued a draft

report from the bench, recommending that the petition to sell real property be

denied because the executor breached his fiduciary duty by accepting a claim in the

amount of $228,459.47, which was not the amount of arrears shown in the certified

court documents submitted by the claimant, but was based instead on an illegal

calculation of compound interest.21 Had the executor simply accepted a claim of

$24,300, which was the amount of arrears on January 13, 2013, as certified by the

Florida court, there would have been sufficient assets in the estate to pay this debt

16 McGlaughlin v. Farren, Del. Ch., C.A. No. 9385-MA, DI 1. 17 Response to Petition to Remove Executor of Estate. DI 5. 18 DI 15 & 18 (C.A. No. 8714-MA). 19 DI 17 (C.A. No. 9385-MA). 20 Transcript of Oral Argument on December 9, 2014, at 27, 30. DI 23 (C.A. No. 9385-MA). 21 Id. at 46-48. Page 6 of 15 without having to sell the real estate. Instead, the executor improperly attempted to

shift the burden of defending the estate against this claim onto the estate’s

beneficiary, i.e., the trust, and then accepted the claim without sufficient proof

because of his relationship with the claimant.22 I also recommended that Andrew

to be removed as personal representative of the Estate of Bennie P. Farren for

breach of his fiduciary duty to the beneficiaries.23 Andrew took a timely exception

to my draft report on December 15, 2014.

II. ISSUES

Andrew takes exception to my conclusion that Courson was required first to

register a Florida support order in Family Court before presenting a claim against

the estate.24 Andrew argues that the amount stated in the affidavit from the Florida

court did not include interest, and since the calculation of interest is a simple

clerical function that can be undertaken by any court, the absence of such a final

calculation by a clerk of the Florida court should not have been an impediment to

the claim. Further, Andrew argues that because the time of presentation of claims

22 Id. at 49. 23 Id. at 50-51. The remainderman, Jared Smith, was allowed to intervene in both actions, and relied upon and adopted McGlaughlin’s arguments as his own. C.A. 8714-MA, DI 26 & 37; C.A. 9385-MA, DI 13 & 26. 24 In fact, what I said was that the claimant “may very well deserve child support arrears plus interest [but] she should have done her homework and presented the claim with all the proper proofs, and at this point, I think this Court is not the Court that should determine those amounts. Whether she goes to the Delaware Family Page 7 of 15 under 12 Del. C. § 2102 is severely limited, if Courson is first required to register a

support order in Family Court, there is a distinct possibility that the subsequent

presentation of her claim would be time-barred. In addition, Andrew argues that

registration would be a pointless act because Family Court has no enforcement

power on claims brought against a decedent’s estate. Since equity does not require

a useless act to be undertaken, Andrew contends that there should be no

requirement that a final order from the State of Florida be registered in Family

Court.

Andrew also takes exception to my recommendation of a complete dismissal

of the petition to sell lands. Instead, he contends that the matter should have been

stayed pending an offer by the claimant to register the Florida order in Family

Court, although he is doubtful that the Family Court would accept such a filing

since there is no indication that any such registration has occurred since the Family

Court’s decision in Pierce v. Higgins, 531 A.2d 1221 (Del. Fam. Ct. 1987).

Finally, Andrew takes exception to my recommendation that he should be

disqualified or removed because of a conflict of interest. Although his argument is

not entirely clear, it appears to be based on the fact that Farren named his son as

successor executor when he could have just as easily named McGlaughlin or some

unrelated third party as his personal representative to avoid a potential conflict.

Court or back to the Florida court to obtain a proper judgment, that’s her choice.” Page 8 of 15 Alternatively, Andrew argues that his father could have re-titled the real estate in a

joint tenancy with McGlaughlin to take the residence out of his estate altogether,

thus ensuring that McGlaughlin had the right to the real property upon his death.

Since Farren did none of those things, Andrew argues that this Court does not have

the power to re-write Farren’s will simply because of events that Farren might not

have anticipated.

McGlaughlin argues that Andrew’s exceptions should be summarily

dismissed because Andrew failed to follow Court of Chancery Rule 144(a),25

which requires an exceptant to order a transcript of a Master’s bench report from

the record. In this case, Andrew did not file a request for the preparation of a

transcript of the draft report that I issued from the bench; instead, McGlaughlin

requested a complete transcript of the oral argument and bench ruling. For this

reason, McGlaughlin argues that Andrew’s exceptions should be dismissed as

waived under Rule 144(b)(1).26 In the alternative, if the Court does not dismiss

Transcript of Oral Argument, at 49. 25 Rule 144(a)(1) provides in relevant part: “The draft report may be provided to the parties in writing or may be entered into the record from the bench. In the latter case, any party taking exception to the draft report shall order a transcript of the report from the record, which shall serve as the text of the report for purposes of review by the Master and the Court.” 26 Rule 144(b)(1) provides in relevant part: “In all cases in which a party files exceptions to the Master’s draft report, the party shall, with the notice of exception, serve and file a designation and request for the preparation of the transcript of those portions of the proceedings it deems necessary for inclusion in the record. A copy of the designation and request shall also be delivered to the court reporter. Page 9 of 15 the exceptions as a sanction for Andrew’s failure to abide by Rule 144,

McGlaughlin argues that the exceptions should be denied because registration of

the Florida support order must occur in order to determine (a) whether the Florida

Arrearage Affidavit includes all interest and fees owed, (b) which state’s law

applies, (c) whether interest is available at all, and (d) whether there are any

defenses that can be asserted. According to McGlaughlin, Family Court has

exclusion and original jurisdiction to hear and determine matters involving child

support under Title 13, Chapter 6 of the Delaware Code and 10 Del. C. § 921(3)

and (9).

McGlaughlin also argues that Andrew’s argument regarding the time

requirements of filing claims against an estate is simply a smoke screen because if

Courson’s claim had been initially rejected by the executor, Courson would have

had an additional three months to file in Family Court to register her Florida order

for enforcement under 12 Del. C. § 2102(c).27 McGlaughlin contends that staying

… . Any party who fails to request a transcript under this subsection as to any portion of the proceedings waives any right to rely upon that portion of the proceedings in support of that party’s arguments favoring or opposing an exception to the report.” 27 12 Del. C. § 2102(c) provides: “Any claim not barred under subsections (a) and (b) of this section which has been rejected by an executor or administrator shall be barred forever unless an action or suit be commenced thereon within 3 months after the executor or administrator has notified the claimant of such rejection by writing known to the executor or administrator; provided, however, in the case of a claim which is not presently due or which is contingent or unliquidated, or to avoid injustice the Court of Chancery, on petition, may order an extension of the 3-month Page 10 of 15 the proceedings, rather than dismissing the petition, in order to allow the claimant

an opportunity to offer to register the Florida court order in Family Court would be

speculative at best, and a dismissal would not prevent Andrew from filing a similar

petition to sell real estate in the future should the need arise. Finally,

McGlaughlin argues that Andrew’s exception to my recommendation that he be

removed as executor should be denied because Andrew mischaracterizes my

recommendation as predicated upon a conflict of interest, when it was based

instead upon his breach of the fiduciary duty to the estate beneficiaries.

III. ANALYSIS

I should dismiss Andrew’s exceptions as waived under Rule 144 because he

failed to order the transcript of my draft report issued from the bench. Because of

the significance of the legal issues presented, however, I will address Andrew’s

exceptions. This Court can order the sale of realty by an executor or administrator

of estate only in accordance with the provisions of 12 Del. C. § 2701(a),28 which

states:

When the personal estate of a decedent is not sufficient to pay the decedent’s debts, the decedent’s executor or administrator may present to the Court of Chancery of the county in which there is any real estate of the decedent a petition outlining such facts, and praying for an order for sale of the whole, or such part thereof, if the personal estate is not sufficient for that purpose.

period, but in no event shall the extension run beyond the applicable statute of limitations.” 28 In re Estate of Burton, 59 A.2d 278 (Del. Ch. 1948). Page 11 of 15 The issue before me, therefore, is whether the executor has demonstrated that the

personal estate of the decedent is insufficient to pay his debts. After payment of

taxes, funeral and administrative expenses, the net personal estate of the decedent

consisted of approximately $27,600. Although the child support claim filed

against the estate far exceeds the decedent’s personal estate, the executor has

conceded that the claimaint’s calculation of compound interest was in error.

Assuming, without deciding, that the child support arrears owed by the decedent at

the date of his death equal $24,300, the amount shown on the certified copy of the

Arrearage Affidavit dated January 18, 2013, the estate would have had sufficient

assets to pay this claim without having to petition to sell the realty.

Although the executor now argues that this Court can and should perform

what he describes as the clerical or ministerial act of calculating simple interest on

the child support arrears, it remains unclear to me: (1) whether the amount shown

on the Arrearage Affidavit includes interest or not; and (2) whether the claimant is

entitled to any interest on this amount as a matter of law. Furthermore, it does not

appear that this Court has jurisdiction to determine whether, as a matter of law, the

claimant is entitled to interest on the child support arrears or to calculate any

interest owed. Delaware Family Court has exclusive original jurisdiction over:

the construction, reformation, enforcement and rescission of agreements made between future spouses, spouses and former spouses

Page 12 of 15 concerning the payment of support or alimony, the payment of child support or medical support, the division and distribution of marital property and marital debts and any other matters incident to a marriage, separation or divorce. The Court shall have jurisdiction to resolve any issues resulting from the construction, reformation, enforcement or rescission of an agreement. In this regard, the Court shall apply the statutory factors set forth in Chapters 5, 6 and 15 of this title.29

Under the Uniform Interstate Family Support Act, which is found in Chapter 6 of

Title 13, the estate of a decedent who is liable under a support order is considered

an obligor.30

Thus, Family Court has exclusive jurisdiction to determine the amount of

arrears owed by the decedent at the time of his death, and to reduce those arrears to

a judgment provided that the proper proofs are made.31 The fact that Family Court

lacks the authority to enforce such a judgment against the personal representative

of the decedent’s estate does not render the claimant’s action in seeking a judgment

from the Family Court futile because the claimant may return to this Court to

enforce the judgment.32 Accordingly, I am dismissing this exception; however, to

the extent that my oral draft report was construed as recommending that the

petition to sell real estate to pay the decedent’s debts should be dismissed with

prejudice, I am modifying my draft report to recommend that the dismissal be

29 13 Del. C. § 507(a). 30 13 Del. C. § 6-102(13)(c). 31 See Pierce v. Higgins, 531 A.2d 1221, 1227-1228 (Del. Fam. 1987). 32 See B.C. v. M.W. Sr., 2008 WL 1948040, at *3 (Del. Fam. Jan. 28, 2008). Page 13 of 15 without prejudice to ensure that if Family Court reduces the child support arrears to

a judgment in an amount exceeding the remaining personal estate, the executor

would not be precluded from filing another petition under 12 Del. C. § 2701.

Regarding the second exception, my recommendation to remove Andrew as

executor for breach of his duty of loyalty and care to the estate’s beneficiaries is

not the equivalent of rewriting the decedent’s will; rather it is aimed at ensuring the

proper administration of the decedent’s estate. The record reveals that Andrew

accepted his mother’s claim of $228,459.13 in back child support around the same

time as he rejected a smaller claim of $4,254.47 (plus interest at legal rate) from

the attorney who had represented his father in custody and child support

proceedings in the Florida Court and U.S. Bankruptcy Court.33 His review of his

mother’s claim consisted only of confirming the Florida legal rate of interest and

replicating the calculation of compound interest that had been performed by his

mother’s accountant.34 Andrew accepted without question that compound interest

was appropriate in the first place.35 Then, Andrew attempted to shift the burden of

defending against his mother’s claim on the beneficiaries of the decedent’s real

33 Appendix at 41-42 (Statement of Claim). 34 Id. at 8-9, 17 (Farren Deposition). 35 Under Florida law, compound interest is prohibited. See Melvin v. Melvin, 391 So.2d 691, 692 (Fla. Dist. Ct. App. 1980) (citing Coggan v. Coggan, 183 So.2d 839 (Fla.2nd Dist. Ct. App. 1966)). Page 14 of 15 estate.36 Although Andrew had a fiduciary duty to the creditors of his father’s

estate, by failing to exercise reasonable care in reviewing his mother’s claim,

Andrew breached his fiduciary duty to the beneficiaries of his father’s estate. For

all of these reasons, I conclude that Andrew breached his duty of loyalty and care

and should be removed as the personal representative of the decedent’s estate.

This exception is dismissed.

CONCLUSION

For the reasons stated above, the exceptions to my draft report are dismissed

except to the extent that I am clarifying that the recommendation to dismiss the

Petition to Sell Real Estate to Pay the Decedent’s Debts should be without

prejudice. My recommendation to grant the petition to remove the executor

remains unchanged. The parties are referred to Court of Chancery Rule 144 for the

process of taking exception to a Master’s Final Report.

Respectfully,

/s/ Kim E. Ayvazian

Kim E. Ayvazian Master in Chancery

KEA/kekz cc:

36 Appendix at 31 (letter dated Feb. 15, 2013 from George B. Smith, Esq. to A. Dean Betts, Jr., Esq.). Page 15 of 15