Fiduciary Trust Co. of New York v. Fiduciary Trust Co. of New York
| Decision Date | 20 April 1982 |
| Citation | 445 A.2d 927 |
| Parties | FIDUCIARY TRUST COMPANY OF NEW YORK, Respondent Below, Appellant, v. FIDUCIARY TRUST COMPANY OF NEW YORK, Petitioner Below, Appellee, v. Mary A. and Thomas F. GRASSELLI Endowment Foundation, Harry W. Grasselli and Josephine G. Winter, Fiduciary Trust Company of New York, Respondents Below, Appellees. |
| Court | United States State Supreme Court of Delaware |
Henry N. Herndon, Jr., Wilmington (argued) and Clark W. Furlow, of Morris, James, Hitchens & Williams, Wilmington, for Fiduciary Trust Co. of New York, trustee under agreement dated Dec. 23, 1964, respondent below, appellant.
Richard G. Bacon, Wilmington (argued) and Thomas P. Sweeney, of Richards, Layton & Finger, Wilmington, for Fiduciary Trust Co. of New York, executor and trustee under the wills of Thomas Fries Grasselli and Mary A. Grasselli, petitioner below, appellee.
Thomas G. Hughes, Wilmington (argued) and Mark D. Sisk, of O'Donnell & Hughes, Wilmington, for Harry W. Grasselli and Josephine G. Winter.
John Biggs, III, of Biggs & Battaglia, Wilmington, for Mary A. and Thomas F. Grasselli Endowment Foundation.
Before HERRMANN, Chief Justice, and McNEILLY and QUILLEN, Justice.
This appeal is from a ruling by the Court of Chancery upon the petition of Fiduciary Trust Company, as Executor of the Estate of Thomas F. Grasselli, seeking instructions for the proper distribution of a portion of a trust corpus.
In his Will, executed in 1965, Mr. Grasselli (hereinafter "Testator") directed specific gifts of personalty and real estate to his wife, Mary A. Grasselli; and in the event she predeceased him, those gifts were to go to his niece, Grace Grasselli Fowler. Specific cash bequests were made, including $50,000. to Robert A. Fowler, the husband of Grace Grasselli Fowler. A picture was bequeathed to Grace Grasselli Fowler for her life, then to Testator's grandniece Mary Antonia Fowler.
The Will then created a trust (hereinafter "Marital Trust"), for the benefit of Testator's wife, naming Fiduciary Trust Company trustee, the corpus to be created from an amount equal to one-half of the value of the Testator's adjusted gross estate as determined for Federal estate tax purposes. Testator directed that the Will be construed in such manner as to assure the qualification of the Marital Trust, as such, under the Internal Revenue Code of 1954. The income was to be paid to the Testator's wife for life, with the power reserved to her to invade the principal if additional funds were needed for her support. Upon her death, the Trust corpus was to be distributed in the manner appointed by her last will and testament. In the event she failed to exercise such power of appointment, Testator provided the following distribution: (1) 45% in trust with the income therefrom to Grace Grasselli Fowler for life and, upon her death, the corpus free of trust to her children; but in the event Mrs. Fowler died without children, 8/11 of the corpus was to be paid to the Grasselli Endowment Foundation and 3/11 to the Cleveland Charities Trust; (2) 40% to the Grasselli Endowment Foundation; and (3) 15% to the Cleveland Charities Trust.
Mary A. Grasselli died in 1979. By her will, she exercised the power of appointment as follows: (1) 48% to the Fowler trust; (2) 43% to the Endowment Foundation; and (3) 9% to the Cleveland Charities. Mary Grasselli's will included a residuary clause naming Grace Grasselli Fowler beneficiary absolutely.
Out of the residuary portion of his estate Testator directed the creation of a second trust (hereinafter "Residuary Trust"), the income to be paid to his wife for the remainder of her life. However, unlike the Marital Trust, she was not given power of appointment over the distribution of the corpus, nor was she permitted to invade it. After the expiration of the wife's life estate, Testator directed a distribution of the Residuary Trust mirroring the distribution specified for the Marital Trust: (1) 45% in trust with the income to Grace Grasselli Fowler, for life, and upon her death, the corpus to her children free of trust; but in the absence of any living children of Mrs. Fowler, the Grasselli Endowment Foundation was to receive 8/11 of the corpus with 3/11 going to the Cleveland Charities Trust; (2) 40% to be paid to the Endowment Foundation; and (3) 15% to be paid to the Cleveland Charities Trust. Until final distribution, invasion of the principal was expressly limited to sums needed to support beneficiaries who might be minors or incompetents. Also, all premiums and dividends from stock of investment companies were to be credited to the principal and not to income.
The First Codicil executed by Testator in 1966 directed certain modifications to the Will provisions. Principally relevant here, a reallocation of the distribution percentages of the Marital and Residuary Trusts was set forth: (1) the 45% originally designated to Grace Grasselli Fowler in trust was increased to 48%; (2) the 40% directed to the Grasselli Foundation was increased to 43%; and (3) the Cleveland Charities share reduced from 15% to 9%.
In 1969, the Testator executed a Second Codicil in holographic form, revoking the contingent gifts of personalty and real estate to Grace Grasselli Fowler and reducing the $50,000. cash bequest to her husband to $25,000. Further, the Second Codicil provided a new set of percentages for use in distributing the corpus of the Marital and Residuary Trusts--the Marital Trust ultimately passing as directed by Mary A. Grasselli's Will: (1) the 48% created by the First Codicil for the benefit of Grace Grasselli Fowler was "reduced to a total of not more than 20%;" (2) the share allocated to the Endowment Foundation was modified to read "shall at no time exceed 40%". *
No reference was made to the Cleveland Charities anywhere in the Second Codicil. It is that omission which created the necessity for the petition for instructions in this case; the percentages no longer totaled 100%.
The parties agree that 20% of the corpus of the Residuary Trust must go to the Fowler family. They have also stipulated that the Endowment Foundation shall receive 41%. Finally, they agree that Cleveland Charities shall receive the 9% provided for in the First Codicil, that amount not having been expressly revoked.
The question, then, is how the undesignated 30% must be distributed.
As to that question, the parties take these positions:
(1) On behalf of Cleveland Charities, it is argued that the failure of the Testator to designate the distribution of the 30% was merely an omission, and the argument continues: Viewing the entire testamentary scheme, the Testator intended the undesignated portion of the trust to go to the Cleveland Charities. In essence, Testator's fundamental plan was to provide for his wife for her life and to preserve the principal of the Residuary Trust for the designated remaindermen. A finding of partial intestacy would result in a distribution destroying the Testator's intent as evidenced by his overall scheme and his apparent understanding of the interrelationship of the respective percentages. Stated differently, a finding of intestacy would result in an increase in, or actual creation of, interests of parties whose interests the Testator either purposefully omitted or expressly limited--as to the former, the collateral heirs, and as to the latter, Grace Grasselli Fowler.
(2) The second position is that of the estate of Testator's wife from which Grace Grasselli Fowler inherits as the residuary beneficiary. Basically, Mrs. Fowler's contention is that in the absence of any express provision as to the distribution of the 30%, the Second Codicil created a partial intestacy. ** In light thereof, Mrs. Fowler asserts that the intestate heirs must be determined as of the time of the Testator's death, in which case the undesignated 30% would pass to the estate of Testator's wife and be distributed according to her will under the residuary clause.
(3) The third position is that of the Collateral Heirs consisting of Harry W. Grasselli, the only living brother of the Testator, and Josephine Grasselli Winter, another niece. They agree that the Second Codicil created a partial intestacy, but contend that the intestate heirs must be determined at the death of the life tenant in which case they become the intestate next of kin.
The Court of Chancery in an unreported opinion, Fiduciary Trust Co. v. Fiduciary Trust Co., C.A. No. 6071 (May 11, 1981), granted summary judgment for the estate of Testator's wife and, by extension, for Grace Grasselli Fowler. The Trial Court held that this case is controlled by Miller v. Equitable Trust Co., Del.Supr., 32 A.2d 431 (1943), and concluded that, thereunder, a finding of a partial intestacy was compelled.
The Trial Court then addressed the issue of when the intestate heirs should be determined and, in so doing, recognized the long-standing rule that Finding no such clear manifestation of a contrary intent, the Trial Court concluded that the intestate heirs must be determined as of the date of the death of Thomas F. Grasselli.
Appeals are brought on behalf of Cleveland Charities and the Collateral Heirs.
The decision below, having been rendered on cross-motions for summary judgment and on a "paper" record, the scope of review on appeal calls for this Court to review the entire record and draw its own conclusions with respect to the facts if the findings below are clearly wrong and if justice requires, especially where the findings arise "from deductions,...
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