Lewis v. Hanson

• Decision Date: 18 March 1932
• Parties: Dora Stewart LEWIS, Mary Washington Stewart Borie and Paula Browning Denckla, Defendants Below, Appellants, v. Elizabeth Donner HANSON, as Executrix and Trustee under the Last Will of Dora Browning Donner, deceased, Plaintiff Below, Appellee, Wilmington Trust Company, a Delaware corporation, as Trustee under three separate Agreements, (1) and (2) with William H. Donner dated
• Court: United States State Supreme Court of Delaware

Page 819

128 A.2d 819

36 Del.Ch. 235

Dora Stewart LEWIS, Mary Washington Stewart Borie and Paula Browning Denckla, Defendants Below, Appellants, v. Elizabeth Donner HANSON, as Executrix and Trustee under the Last Will of Dora Browning Donner, deceased Plaintiff Below, Appellee Wilmington Trust Company, a Delaware corporation, as Trustee under three separate Agreements, (1) and (2) with William H Donner dated March 18, 1932 and March 19, 1932, and (3) with Dora Browning Donner dated March 25, 1935, and others Defendants Below, Appellees.

Supreme Court of Delaware.

Jan. 14, 1957.

Robert B. Walls, Jr., Wilmington, guardian ad litem for Dorothy B. R. Stewart and William Donner Denckla, appellee pro se.

Caleb S. Layton, Wilmington, for Wilmington Trust Co., appellee.

David F. Anderson, Wilmington, for Delaware Trust Co., appellee.

Edwin D. Steel, Jr., guardian ad litem for Joseph Donner Winsor, Curtin Winsor, Jr., and Donner Hanson, appellee pro se.

WOLCOTT and BRAMHALL, Justices, and CAREY, Judge, sitting.

WOLCOTT, Justice.

This appeal involves two fundamental questions: (1) Whether a purported inter vivos trust and the exercise of a power of appointment under it are valid or invalid; and (2) whether the parties may litigate the question of validity in a Delaware court because of an adverse adjudication upon the point by a Florida court.

The action below, commenced by Elizabeth Donner Hanson ¹ as the Florida executrix of the settlor's will and, also, in her capacity as trustee under the residuary clause of that will, seeks a declaratory judgment establishing the persons entitled to $417,000 which was distributed by the inter vivos trustee pursuant to the exercise of the power of appointment.

The parties named as defendants in the action include Wilmington Trust Company, trustee under the trust agreement in question and, as such, the distributor of the $417,000, Delaware Trust Company, trustee, the recipient of $400,000 of the trust assets, the recipients of the balance of $17,000, and all possible claimants of the trust corpus, either under the exercise of the power of appointment or under the settlor's Florida will.

The cause came up for decision below on four cross-motions for summary judgment. It will suffice to state that the defendants divide themselves into two contending groups. One group, which we will call the 'Lewis Group', maintains that the trust agreement is invalid as an inter vivos trust instrument and that, accordingly, the exercise of the power of appointment was testamentary in character and as such, ineffective under Florida law to pass any interest. The Lewis Group contends that the entire trust corpus comprises part of the Florida estate of the settlor and passes under her will.

The second group, which we will call the 'Hanson Group' maintains that the trust agreement is valid and that, accordingly, the transfer of $417,000 pursuant to the exercise of the appointment is legally sufficient to pass title. Needless to say, the adoption of the contention of one group will benefit it financially to the loss of the other.

The Acting Vice Chancellor granted summary judgment in favor of the Hanson Group, holding that the trust agreement was a valid inter vivos trust; that the exercise of the power of appointment was effective to pass title to the $417,000, and that there was no estoppel resulting from the Florida judgment. From this decision the Lewis Group appeals.

The facts are not in dispute. On March 25, 1935, Dora Browning Donner (hereafter Mrs. Donner), then being a resident of Pennsylvania, entered into a trust agreement with Wilmington Trust Company and deposited certain securities with it as the trust corpus. By the terms of the agreement Wilmington Trust Company was directed to manage, invest and reinvest the trust corpus and to pay over the net income to Mrs. Donner for her life who reserved to herself a power of appointment of the corpus exercisable either by instrument or by will. Failing the exercise of the power, the agreement directed that the trust corpus be distributed by the trustee at her death to her issue surviving, or to her next of kin.

Specific powers were conferred upon Wilmington Trust Company, as trustee, which in substance were the ordinary powers granted to a trustee. However, it was specified that Wilmington Trust Company could exercise certain of the powers 'only upon the written direction of, or with the written consent' of a trust advisor. These powers were (1) to sell trust assets, (2) to invest proceeds of sale of trust property, and (3) to participate in mergers and reorganizations of corporations whose securities were held as part of the trust assets.

In the agreement, Mrs. Donner designated a trust advisor and reserved the right to nominate other advisors at any time during her lifetime. She also reserved the right to amend, alter or revoke the agreement in whole or in part at any time, as well as the right to change from time to time the trustee. On one occasion, she withdrew $75,000 from the trust corpus, which sum she later replaced.

On two different occasions prior to 1949, Mrs. Donner executed instruments exercising the power of appointment. Finally, on December 3, 1949, ² by a non-testamentary instrument, she exercised the power of appointment, specifically revoking the earlier exercises by her of the power, and directing the Wilmington Trust Company, six months after her death, to pay over a total of $17,000 to Bryn Mawr Hospital and certain family retainers, $200,000 to Delaware Trust Company in trust for Joseph Donner Winsor, $200,000 to Delaware Trust Company in trust for Donner Hanson, and the residue of the corpus to the executrix of her will.

In 1944, Mrs. Donner changed her residence from Pennsylvania to Palm Beach County, Florida where she was domiciled at her death in 1952. Her will was probated in Florida and Elizabeth Donner Hanson duly qualified as executrix. The residuary clause of her will directed her executrix to pay from the residuary estate, which specifically included the balance of the trust corpus not appointed in her lifetime, all death taxes on property appointed from the trust corpus during her lifetime, and to divide the balance remaining into two equal parts, one part to be transferred to Delaware Trust Company in trust for Katherine N. R. Denckla, a daughter; and the other part to be transferred to Elizabeth Donner Hanson in trust for Dorothy B. R. Stewart, another daughter, for her life, and upon her death to Delaware Trust Company in trust for Katherine Denckla.

At the death of Mrs. Donner the trust corpus held by Wilmington Trust Company amounted to in excess of $1,490,000. Thereafter, pursuant to the directions contained in the exercise of the power of appointment Wilmington Trust Company distributed assets in the aggregate amount, of $417,000 and transferred a portion of the balance of the corpus to the executrix of the will of Mrs. Donner.

In January, 1954 the two residuary beneficiaries under the will of Mrs. Donner ³ brought an action for declaratory judgment in Palm Beach County, Florida against Mrs. Hanson, individually and as executrix, Wilmington Trust Company, Delaware Trust Company, and some of the other possible claimants to the assets passing under the residuary clause of the will of Mrs. Donner. ⁴ In this action a judgment was sought determining what property passed under the will of Mrs. Donner, and the authority of the executrix over the assets held by Wilmington Trust Company under the 1935 agreement.

Neither Wilmington Trust Company nor Delaware Trust Company were served personally in the Florida action, nor did either of them appear. None of the trust assets held by Wilmington Trust Company has ever been held or administered in Florida, nor has Wilmington Trust Company ever done business in the State of Florida.

On January 14, 1955 the Circuit Court of Palm Beach County, Florida entered a decree ⁵ holding that it lacked jurisdiction over the trust assets in Delaware and over Wilmington Trust Company, Delaware Trust Company and the other non-answering defendants, and directed that the complaint be dismissed without prejudice as to all of them. It was also held that no present interest passed to any beneficiary other than Mrs. Donner under the agreement of 1935 and that the exercise of the power of appointment by her was testamentary in character and, as such, invalid under Florida law because it was not subscribed by two witnesses. It was held, therefore, that the assets held by Wilmington Trust Company passed under the will of Mrs. Donner, and that the distribution thereof was to be made in accordance with the residuary clause.

Thereafter, an appeal was taken to the Supreme Court of Florida by the equivalent of the Hanson Group seeking a reversal of the holding of invalidity of the 1935 trust and the exercise of the power of appointment. Similarly, the equivalent of the Lewis Group by cross-appeal sought a reversal of the holding of lack of jurisdiction over Wilmington Trust Company and Delaware Trust Company.

The Supreme Court of Florida handed down its opinion, 100 So.2d 378, affirming that portion of the decree adjudging the invalidity of the trust and the exercise of the power of appointment, and reversing that portion of the decree holding that Florida had no jurisdiction over Wilmington Trust Company and Delaware Trust Company.

In the interim, while the appeal was pending in Florida, the Lewis Group perfected its appeal in this court from the judgment of the Acting Vice Chancellor and argued it before us.

In the argument and on the briefs, the main emphasis was placed by the Lewis Group upon the estopping effect of the Florida judgment. In deciding this appeal, however, we think a more logical approach to what has now become a headlong jurisdictional collision between states is to consider first the question of what law governs the basic validity of the trust...