Wilmington, Del. (October 9, 2024) - Wilmington Partner Ann Kashishian recently secured the dismissal of a lawsuit asserting fraudulent transfer and other claims against several clients in the Delaware Court of Chancery. The plaintiff, a long-term care facility located in Newark, Delaware, initiated the lawsuit against Ms. Kashishian's clients - relatives of a former facility resident - over an outstanding balance at the time of the resident's death.
The circumstances giving rise to the dispute date back to August 2022, when the decedent executed a deed transferring his Newark, Delaware property to two of Ms. Kashishian's clients - the decedent's son and granddaughter. Six months later, the decedent and his daughter-in-law - also Ms. Kashishian's client - entered into an admission agreement for the decedent to receive care at Newark Manor Nursing Home.
At the time the decedent passed away last December, he owed a balance of $94,730. Seeking to recover that sum - plus interest, costs, and punitive damages - Newark Manor filed suit against Ms. Kashishian's clients in the Delaware Court of Chancery, asserting claims for fraudulent transfer, unjust enrichment, breach of contract, fraudulent misrepresentation, and negligent misrepresentation. With respect to the fraudulent transfer count, Newark Manor alleged that the decedent transferred his property at a time during which he "was otherwise insolvent," "inten[ding] to default the rights of creditors." Ms. Kashishian filed a motion to dismiss the complaint in its entirety.
Magistrate Bonnie W. David sided with Ms. Kashishian's clients in an opinion filed last week.
Magistrate David concluded that Newark Manor failed to allege sufficient facts to support a claim for either actual or constructive fraudulent transfer. With respect to the former, the magistrate wrote that the complaint did not allege "specific supporting facts describing the circumstances of the transfer from which the Court can infer an actual intent to hinder, delay, or defraud any creditor," noting the absence of any allegations that the decedent was insolvent when he transferred the Newark property to his family members or that he was ill or expecting to incur expenses or liabilities. Concerning the latter, the magistrate found that Newark Manor did not set forth facts to support the notion that the decedent "reasonably should have believed he would incur debts beyond his ability to pay as they became due — in other words, that he was, or expected to become, insolvent."
Magistrate David further held that Newark Manor's negligent misrepresentation claim could not survive because the healthcare facility did not allege that it had a special relationship with the decedent's relatives, nor was it seeking any equitable remedy. Rather, the dispute arose from a transaction that was the product of arms-length negotiations between Newark Manor and the defendants, the magistrate found.
Finally, the magistrate dismissed Newark Manor's unjust enrichment, breach of contract, and fraudulent misrepresentation claims on the grounds that they were legal - not equitable - claims for which the facility sought monetary damages, and therefore were not within the Court of Chancery's jurisdiction. She dismissed the suit in its entirety while providing leave for the facility to transfer those counts to the Delaware Superior Court.
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