Dryden v. Estate of Joseph Gallucio, Jr., (Del. Ch. Jan. 11, 2007), read opinion here .

This Chancery Court post-trial letter opinion addresses a dispute between the ex-wife of the decedent and his widow over the scope of commitments the decedent made to his ex-wife relating to their divorce, and the appropriate remedy, if any, for his failure to meet his obligations at the time of his death. The ex-wife, Dryden, sought the imposition of a constructive trust over the proceeds of a life insurance policy paid to the decedent’s second wife upon the decedent’s death. The estate of the decedent cannot satisfy the claims of the ex-wife. 

The court described a constructive trust as an equitable remedy often employed for unjust enrichment. The court determined that the ex-wife was entitled to the proceeds of the policy because the decedent was contractually obligated to make her the beneficiary but he failed to do so.

In footnote 15, the court determined that even though the Family Court has exclusive jurisdiction over matters involving former spouses, the court reasoned that such jurisdiction granted to the Family Court, did not deprive Chancery Court of its traditional equitable jurisdiction over claims such as those involving unjust enrichment. 

The court also interpreted a settlement agreement between the decedent and his ex-wife regarding their divorce, and applied the hornbook contract interpretation principle requiring: 

Where possible, an interpretation of all the provisions of an agreement “in a way that gives effect to every term of the instrument, and that, if possible, reconciles all of the provisions of the instrument when read as a whole.” 

The court interpreted that divorce settlement agreement to mean that the alimony provision would conclude with the death of the decedent or his first wife or her remarriage. The court further reasoned that a constructive trust over a separate account was not appropriate even though it was unjust for the second wife to retain the benefits of the account and despite the fact that it was an obligation of the estate which the estate is unable to satisfy. The structural problem in the argument of the ex-wife is that she did not have an equitable claim to the account and the requirement for a constructive trust was not satisfied because there were no specific identifiable proceeds from which the ex-wife could trace equitable ownership. 

However, other remedies were available. The court determined that a transfer of assets by the decedent so that they would be out of the reach of his ex-wife, while she was a creditor, satisfied the requirements of the Fraudulent Transfer Act pursuant to Chapter 13 of Title 6 of the Delaware Code. 

The court discusses the various prerequisites of the  Fraudulent Transfer Act and reasoned that the decedent acted with the actual intent to hinder his ex-wife, as a creditor with a claim, when he established a new account with his new wife. Even though the ex-wife did not prove either insolvency at the time of the transfer or that the transfer was of substantially all of the assets of the decedent, “the transfer made it highly unlikely that the decedent would be able to meet his obligations to his ex-wife.” 

Because the court found an actual intent to hinder the creditor, the court held that it was unnecessary to explore whether the decedent was insolvent at the time of the transfer, and therefore, the burden of proving his solvency and the fairness of the transfer shifted to the recipient. 

Moreover, the court rejected an argument of latches based on the understandable human explanation that the ex-wife did not want to litigate with her former husband while he was suffering from cancer. The defendant also failed to meet her burden of demonstrating that any delay in bringing the action was either unreasonable or that it had prejudiced her.

UPDATE: Here the court denies a Motion for Reargument.