• Delaware Court of Chancery
  • D66367
  • Jun 30 2014 (Date Decided)

DELAWARE COURT OF CHANCERY

I/M/O Estate of Dean, DeFAX Case No. D66367 (Del. Ch. June 30, 2014) LeGrow, M.C. (24 pages).

In dispute between two adult children of an elderly, wealthy parent: 1) one of the children was entitled to a forensic accounting as to how the other, who held a power of attorney for the parent, had disbursed funds on his parent's behalf from the time the power of attorney was executed; and 2) the child who sought the accounting was entitled to reimbursement of educational expenses incurred, consistent with the parent's past pattern of giving.

Petitioner William "Kem" Ketcham and respondent Dean Ketcham were the surviving adult children of Paulina Dean. Paulina resided in Tortola, BVI. In the late 1990s, Paulina opened two bank accounts in Tortola - the "919 account" and the "955 account."

In 2004 Paulina executed a power of attorney, naming Kem as the attorney in fact. Kem began using it in 2009, when she was declared incompetent. Kem's authority included near total control over Paulina's finances, including the power to make gifts out of Paulina's property and on her behalf, to her issue, in a manner consistent with past patterns of giving, in Kem's sole and absolute discretion.

In 2008, Dean began questioning his mother's financial affairs. Contemporaneously, Kem declared his role in her affairs had changed and now was directed by the power of attorney. Dean came to learn that there had been a number of transfers from the 919 account to other bank accounts. Kem explained that those other accounts belonged to Kem or his wife and were reimbursements for Kem's children's educational expenses. Paulina's past pattern of giving had included paying for her grandchildren's educational expenses as a matter of course. Upon learning that Kem was continuing to receive reimbursement for his children's education, Dean concluded he should seek reimbursement for past expenses.

Kem refused to reimburse Dean for educational expenses incurred after 2001, citing Dean's failure to raise the issue in a "timely" manner. Kem argued that reimbursement under those circumstances would be inconsistent with Paulina's past pattern of giving and Dean waived his right to reimbursement.

Kem filed a petition under 10 Del. C. §6504, asking the court to provide instructions regarding reimbursement of the parties' educational expenses. Dean filed a counterclaim seeking an accounting of all transactions and activities Kem had engaged in as Paulina's agent under the power of attorney, and an accounting of all funds Kem paid to or for the benefit of himself or his family.

Following trial, a master determined that Dean was entitled to a forensic accounting of Kem's transactions on his mother's behalf beginning on the date the power of attorney was executed. The master also concluded that Dean was entitled to reimbursement of educational expenses he incurred, consistent with his mother's past pattern of giving.

The master rejected Kem's argument that he did not accept a role as Paulina's agent until she was declared incompetent and therefore could not be required to account for transactions prior to 2009. From the time Paulina gave Kem access to her accounts, Kem wielded almost unfettered control over Paulina's financial affairs. His access to Paulina's accounts, and his frequent use of those accounts to transact business on her behalf, was consistent with someone exercising authority or performing duties as an agent.

The master found that neither assembled bank statements nor the accompanying documents prepared by Kem amounted to a proper accounting under the Act.

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