Hanson v. Denckla Lewis v. Hanson, Nos. 107 and 117

• Court: United States Supreme Court
• Writing for the Court: WARREN
• Citation: 2 L.Ed.2d 1283,357 U.S. 235,78 S.Ct. 1228
• Parties: Elizabeth Donner HANSON, Individually, as Executrix of the Will of Dora Browning Donner, Deceased, et al., Appellants, v. Katherine N. R. DENCKLA, Individually, and Elwyn L. Middleton, as Guardian of the Property of Dorothy Browning Stewart. Dora Stewart LEWIS, Mary Washington Stewart Borie and Paula Browning Denckla, Petitioners, v. Elizabeth Donner HANSON, as Executrix and Trustee Under the Last Will of Dora Browning Donner, Deceased, et al
• Decision Date: 23 June 1958
• Docket Number: Nos. 107 and 117

357 U.S. 235 78 S.Ct. 1228 2 L.Ed.2d 1283 Elizabeth Donner HANSON, Individually, as Executrix of the Will of Dora Browning Donner, Deceased, et al., Appellants,

v.

Katherine N. R. DENCKLA, Individually, and Elwyn L. Middleton, as Guardian of the Property of Dorothy Browning Stewart. Dora Stewart LEWIS, Mary Washington Stewart Borie and Paula Browning Denckla, Petitioners, v. Elizabeth Donner HANSON, as Executrix and Trustee Under the Last Will of Dora Browning Donner, Deceased, et al.

Nos. 107 and 117. Argued March 10, 11, 1958. Decided June 23, 1958. Rehearing Denied Oct. 13, 1958.

See 79 S.Ct. 10.

[Syllabus from pages 235-237 intentionally omitted]

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Mr. William H. Foulk, Wilmingon, Del., for appellants Hanson et al.

Mr. Arthur G. Logan, Wilmington, Del., for petitioners Lewis et al.

Mr. Sol A. Rosenblatt, New York City, for appellees Denckla et al.

Mr. Edwin D. Steel, Jr., Wilmington, Del., for respondents Hanson et al.

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Mr. CHIEF JUSTICE WARREN delivered the opinion of the Court.

This controversy concerns the right to $400,000, part of the corpus of a trust established in Delaware by a settlor who later became domiciled in Florida. One group of claimants, 'legatees,' urge that this property passed under the residuary clause of the settlor's will, which was admitted to probate in Florida. The Florida courts have sustained this position. Fla., 100 So.2d 378. Other claimants, 'appointees' and 'beneficiaries,' contend that the property passed pursuant to the settlor's exercise of the inter vivos power of appointment created in the deed of trust. The Delaware courts adopted this position and refused to accord full faith and credit to the Florida determination because the Florida court had not acquired jurisdiction over an indispensable party, the Delaware trustee. —- Del. —-, 128 A.2d 819. We postponed the question of jurisdiction in the Florida appeal, No. 107, 354 U.S. 919, 77 S.Ct. 1377, 1 L.Ed.2d 1434, and granted certiorari to the Delaware Supreme Court, No. 117, 354 U.S. 920, 77 S.Ct. 1380, 1 L.Ed.2d 1435.

The trust whose validity is contested here was created in 1935. Dora Browning Donner, then a domiciliary of Pennsylvania, executed a trust instrument in Delaware naming the Wilmington Trust Co., of Wilmington, Delaware, as trustee. The corpus was composed of securities. Mrs. Donner reserved the income for life, and stated that the remainder should be paid to such persons or upon such trusts as she should appoint by inter vivos or testamentary instrument. The trust agreement provided that Mrs. Donner could change the trustee, and that she could amend, alter or revoke the agreement at any time. A measure of control over trust administration was assured by the provision that only with the consent of a trust 'advisor' appointed by the settlor could the trustee (1) sell trust assets, (2) make investments, and (3) participate in any plan, proceeding, reorganization or merger

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involving securities held in the trust. A few days after the trust was established Mrs. Donner exercised her power of appointment. That appointment was replaced by another in 1939. Thereafter she left Pennsylvania, and in 1944 became domiciled in Florida, where she remained until her death in 1952. Mrs. Donner's will was executed Dec. 3, 1949. On that same day she executed the inter vivos power of appointment whose terms are at issue here.¹ After making modest appointments in favor of a hospital and certain family retainers (the 'appointees'),² she appointed the sum of $200,000 to each of two trusts previously established with another Delaware trustee, the Delaware Trust Co. The balance of the trust corpus, over $1,000,000 at the date of her death, was appointed to her executrix. that amount passed under the residuary clause of her will and is not at issue here.

The two trusts with the Delaware Trust Co. were created in 1948 by Mrs. Donner's daughter, Elizabeth Donner Hanson, for the benefit of Elizabeth's children, Donner Hanson and Joseph Donner Winsor. In identical terms they provide that the income not required for the beneficiary's support should be accumulated to age 25, when the beneficiary should be paid 1/4 of the corpus and receive the income from the balance for life. Upon the death of the beneficiary the remainder was to go to such of the beneficiary's issue or Elizabeth Donner Hanson's issue as the beneficiary should appoint by inter vivos or testamentary instrument; in default of appointment to the beneficiary's issue alive at the time of his death, and if none to the issue of Elizabeth Donner Hanson.

Mrs. Donner died Nov. 20, 1952. Her will, which was admitted to probate in Florida, named Elizabeth Donner

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Hanson as executrix. She was instructed to pay all debts and taxes, including any which might be payable by reason of the property appointed under the power of appointment in the trust agreement with the Wilmington Trust Co. After disposing of personal and household effects, Mrs. Donner's will directed that the balance of her property (the $1,000,000 appointed from the Delaware trust) be paid in equal parts to two trusts for the benefit of her daughters Katherine N. R. Denckla and Dorothy B. R. Stewart.

This controversy grows out of the residuary clause that created the lastmentioned trusts. It begins:

'All the rest, residue and remainder of my estate, real, personal and mixed, whatsoever and wheresoever the same may be at the time of my death, including any and all property, rights and interest over which I may have power of appointment which prior to my death has not been effectively exercised by me or has been exercised by me in favor of my Executrix, I direct my Executrix to deal with as follows * * *.'

Residuary legatees Denckla and Stewart, already the recipients of over $500,000 each, urge that the power of appointment over the $400,000 appointed to sister Elizabeth's children was not 'effectively exercised' and that the property should accordingly pass to them. Fourteen months after Mrs. Donner's death these parties petitioned a Florida chancery court for a declaratory judgment 'concerning what property passes under the residuary clause' of the will. Personal service was had upon the following defendants: (1) executrix Elizabeth Donner Hanson, (2) beneficiaries Donner Hanson and Joseph Donner Winsor, and (3) potential beneficiary William Donner Roosevelt, also one of Elizabeth's children. Curtin Winsor, Jr., another of Elizabeth's children and

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also a potential beneficiary of the Delaware trusts, was not named as a party and was not served. About a dozen other defendants were nonresidents and could not be personally served. These included the Wilmington Trust Co. ('trustee'), the Delaware Trust Co. (to whom the $400,000 had been paid shortly after Mrs. Donner's death), certain individuals who were potential successors in interest to complainants Denckla and Stewart, and most of the named appointees in Mrs. Donner's 1949 appointment. A copy of the pleadings and a 'Notice to Appear and Defend' were sent to each of these defendants by ordinary mail, and notice was published locally as required by the Florida statutes dealing with constructive service.³ With the exception of two individuals whose interests coincided with complainants Denckla and Stewart, none of the nonresident defendants made any appearance.

The appearing defendants (Elizabeth Donner Hanson and her children) moved to dismiss the suit because the exercise of jurisdiction over indispensable parties, the Delaware trustees, would offend Section 1 of the

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Fourteenth Amendment. The Chancellor ruled that he lacked jurisdiction over these nonresident defendants because no personal service was had and because the trust corpus was outside the territorial jurisdiction of the court. The cause was dismissed as to them. As far as parties before the court were concerned, however, he ruled that the power of appointment was testamentary and void under the applicable Florida law. In a decree dated Jan. 14, 1955, he ruled that the $400,000 passed under the residuary clause of the will.

After the Florida litigation began, but before entry of the decree, the executrix instituted a declaratory judgment action in Delaware to determine who was entitled to participate in the trust assets held in that State. Except for the addition of beneficiary Winsor and several appointees, the parties were substantially the same as in the Florida litigation. Nonresident defendants were notified by registered mail. All of the trust companies, beneficiaries, and legatees except Katherine N. R. Denckla, appeared and participated in the litigation. After the Florida court enjoined executrix Hanson from further participation, her children pursued their own interests. When the Florida decree was entered the legatees unsuccessfully urged it as res judicata of the Delaware dispute. In a decree dated Jan. 13, 1956, the Delaware Chancellor ruled that the trust and power of appointment were valid under the applicable Delaware law, and that the trust corpus had properly been paid to the Delaware Trust Co. and the other appointees. Hanson v. Wilmington Trust Co., 119 A.2d 901.

Alleging that she would be bound by the Delaware decree, the executrix moved the Florida Supreme Court to remand with instructions to dismiss the Florida suit then pending on appeal. No full faith and credit question was raised. The motion was denied. The Florida Supreme Court affirmed its Chancellor's conclusion that Florida law applied to determine the validity of the trust

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and power of appointment. Under that law the trust was invalid because the settlor had reserved too much power over the trustee and trust corpus, and the power of appointment was not independently effective to pass the property because it was a testamentary act not accompanied by the requisite formalities. The Chancellor's conclusion...