Chachkes v. David

Background

Jacob Chachkes was the income beneficiary of the Jane David Trust, created by his long-term partner, Jane David. John V. David was Jane David’s son, and Jason V. David was her grandson. The trust agreement required the trustees to pay Chachkes the trust’s entire net income and authorized trustees other than Chachkes to distribute trust principal for his health, education, maintenance, and support, considering his circumstances and other income.

The trust agreement also stated that Chachkes could, during his lifetime and at his discretion, remove or cause the removal of a trustee or successor trustee and designate a replacement. After Chachkes resigned as a trustee under a 2019 agreement, Jason David became successor trustee. Chachkes later sought to remove John David and Jason David, but they disputed his authority to do so.

The complaint asserted claims including breach of fiduciary duty, breach of the trust agreement, rescission of the 2019 agreement, unjust enrichment, money had and received, an accounting, declaratory relief, and injunctive relief. John David and Jason David moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss claims 2, 3, 6, and 8. Chachkes moved for partial summary judgment on his authority to remove the trustees.

Summary-Judgment Ruling

The court granted Chachkes’s motion for partial summary judgment. It held that the motion was not premature because the parties agreed on the authenticity and operative status of the trust agreement, and the issue presented was a legal question involving interpretation of unambiguous contract language.

The court interpreted Article VIII(E)(1) to give Chachkes the power to remove a trustee during his lifetime, even after he resigned from his own trustee position. The phrase referring to a trustee “under the trust” modified the trustee or successor trustee who could be removed; it did not limit Chachkes’s removal power to the period when he served as a trustee. The court also relied on Article VIII(E)(2), which transferred the removal power to John David after Chachkes’s death, not after Chachkes’s resignation. The court reasoned that the defendants’ interpretation would create a period when no one could remove a trustee.

Motion to Dismiss

The court granted the defendants’ motion to dismiss counts 2, 3, 6, and 8, and the conclusion states that those counts were dismissed without prejudice to Chachkes filing an amended complaint within two weeks.

Count 2—Breach of Contract

The court dismissed the breach-of-contract claim because Chachkes did not adequately allege that the defendants breached the trust agreement. The agreement required payment of net income in monthly or other convenient installments, not necessarily monthly payments. The complaint also did not identify a specific promise that John David violated.

The court further held that the allegations concerning denied principal distributions were insufficient. The trust agreement gave the trustees “absolute and uncontrolled discretion” over principal distributions, and the complaint did not allege specific facts showing that the defendants acted in bad faith or unreasonably denied money necessary for Chachkes’s health, maintenance, or support. The allegation that the defendants failed to transfer trust assets after Chachkes’s attempted trustee removal also failed because the complaint did not allege damages from that failure.

Count 3—Rescission

Rescission is a remedy that cancels a contract. The court dismissed Chachkes’s rescission claim because the complaint did not adequately allege economic duress, lack of consideration, or unconscionability.

The court concluded that the complaint did not allege an unlawful threat or facts showing that Chachkes had no reasonable alternative to signing the 2019 agreement. It also found that the agreement provided consideration: Chachkes received a one-time payment for a vacation home and a monthly payment of the greater of the trust’s actual income or $9,500, benefits the original trust agreement did not guarantee. The court found insufficient allegations that the agreement was procedurally or substantively unconscionable.

Count 6—Equitable Accounting

An equitable accounting is a court-ordered review of money or property handled by someone with a fiduciary relationship. The court dismissed this claim because Chachkes did not allege that he demanded an accounting and that the defendants refused. The court also found no sufficient allegation that making a demand would have been futile.

Count 8—Injunctive Relief

The complaint labeled preliminary and permanent injunctions as separate causes of action, but Chachkes clarified that he intended them as forms of relief rather than independent claims. The court noted that Chachkes had not moved for a preliminary injunction and that challenging permanent injunctive relief was premature at the motion-to-dismiss stage. Nevertheless, the conclusion states that the motion to dismiss count 8 was granted and that count 8 was dismissed without prejudice.

Disposition

Judge Lewis J. Liman granted the motion for partial summary judgment. He also granted the motion to dismiss counts 2, 3, 6, and 8 and dismissed those counts without prejudice to filing an amended complaint within two weeks. The order directed the Clerk of Court to close the motions at Docket Nos. 26 and 30.