State of Del. ex rel. Gebelein v. Belin

• Decision Date: 19 September 1984
• Docket Number: AS-255,Nos. AS-119,s. AS-119
• Parties: STATE OF DELAWARE, ex rel, Richard S. GEBELEIN, the Attorney General, and the State of Florida, ex rel, Jim Smith, Attorney General, Appellants, v. J. C. BELIN, T. S. Coldewey, W. L. Thornton, William B. Mills, Alfred duPont Dent, Jacksonville National Bank, and the Nemours Foundation, a non-profit Florida corporation, Appellees.
• Court: Florida District Court of Appeals

Page 1237

456 So.2d 1237

STATE OF DELAWARE, ex rel, Richard S. GEBELEIN, the Attorney General, and the State of Florida, ex rel, Jim Smith, Attorney General, Appellants, v. J. C. BELIN, T. S. Coldewey, W. L. Thornton, William B. Mills, Alfred duPont Dent, Jacksonville National Bank, and the Nemours Foundation, a non-profit Florida corporation, Appellees.

Nos. AS-119, AS-255.

District Court of Appeal of Florida,

First District.

Sept. 19, 1984.

Rehearing Denied Nov. 1, 1984.

John F. Corrigan of Ulmer, Murchison, Ashby, Taylor & Corrigan, Jacksonville; of counsel: Charles M. Oberly, III, Atty. Gen., Fred S. Silverman, State Sol., Regina M. Mullen, Deputy Atty. Gen., State of Del., Dept. of Justice, Wilmington, Del., for appellant State of Del.

Jim Smith, Atty. Gen., Mitchell D. Franks, Chief Trial Counsel, Tallahassee, T. Edwards Austin, State Atty., Sp. Asst. Atty. Gen., Jacksonville, Stephen R. White, Asst. State Atty., Sp. Asst. Atty. Gen., Jacksonville, for appellant State of Fla.

Fred H. Kent, Jr. of Kent, Watts, Durden, Kent, Nichols & Mickler, Jacksonville, for appellees.

JOANOS, Judge.

The States of Delaware (Delaware) and Florida (Florida) appeal from a final judgment of the circuit court finding that the Trustees of the Alfred I. duPont testamentary trust (Trust) had not violated the provisions of the prudent person or prudent trustee rule and had not breached the Stipulation and Settlement Agreement between Delaware, Florida, the Trustees and the Nemours Foundation (Nemours), finding no detriment to the trust beneficiaries or cause for removal of the Trustees by their inherent or potential conflict in serving as officers and directors of corporations whose stock is owned by the Trust, and ordering additional payment of income to the income beneficiary based upon the court's determination of a greater valuation of trust assets than had been made previously. Also appealed is a final order clarifying the final judgment, ordering that payment of not less than 3 percent of $805,290,384.00, less any amounts already paid by the Trust, be made to Nemours for the year 1980. The appeals were consolidated for review. We affirm.

Alfred I. duPont's will provided for the creation of a perpetual, charitable trust which, after the death of his wife Jessie Ball duPont, would pay all of its net income to Nemours, "a charitable institution for the care and treatment of crippled children, but not of incurables, or the care of old men and old women, and particularly old couples, first consideration, in each instance, being given to beneficiaries who are residents of Delaware, ...." Mr. duPont's express testamentary reason for establishing Nemours was his "firm conviction throughout life that it is the duty of everyone to do what is within his power to alleviate human suffering ...." His will specifically provided that the Trustees should "carry on any business enterprise in which I am interested in my lifetime, ..., or to enter into an incorporation of the same and accept corporate stock in lieu of any individual interest, at such valuation or valuations, or to sell out my paid interest at such price or prices, as in the judgment of my said Executors or Trustees shall seem fair and adequate." Additionally, the will directed the Trustees "[t]o do every and all things that they may deem best for the conservation, protection and betterment of my estate, as fully and completely as I might do, personally, were I alive and able to act for myself." The initial Trustees were Mrs. duPont, Edward Ball (Mrs. duPont's brother), Reginald Huidekoper (duPont's son-in-law) and The Florida National Bank of Jacksonville, as corporate trustee. The Trust initially was comprised of two companies, Gulf Coast Properties, Inc. and Panama Beach Development Co., consisting of: timberlands; fifty (50) percent interest in St. Joe Paper Co. (St. Joe); St. Joe Telephone and Telegraph Co.; Apalachicola Northern Railroad; Port St. Joe Dock and Terminal Railway Co.; and a substantial block of the common stock of E. I. duPont Co., and other small companies which in turn owned mortgages, notes and other securities. Upon receipt of these assets the Trustees purchased the outstanding interest in St. Joe, merged Gulf Coast Properties, Inc. and Panama Beach Development Co. into St. Joe and began to purchase Florida East Coast Railway bonds while the railway was in receivership, ultimately obtaining a 57 percent interest when the railway came out of receivership. Following the inception of the Trust in 1939, some Trustees died, were replaced, and additional trustees were elected, ultimately leading to Coldewey, Mills, Thornton, Belin, Alfred duPont Dent (duPont's grandson), Ball and Mrs. duPont as Trustees. Mrs. duPont died in 1970. Ball died in 1981, with no successor Trustee appointed. Jacksonville National Bank, successor to Florida National Bank, resigned as corporate trustee in 1982. The present Trustees, Belin, Thornton, Coldewey and Dent, also serve as directors and officers of St. Joe or its subsidiaries. St. Joe, the primary asset of the Trust and a holding company for the consolidated assets, provides the Trustees a vehicle to regulate the Trust income, all of which by the terms of the Trust must be distributed to Nemours.

Delaware's initial complaint filed in 1977, seeking injunctive relief, removal of some of the Trustees and other relief, was dismissed without prejudice for failure to state a cause of action. The trial court dismissed Delaware's amended complaint with prejudice, holding that Delaware did not have standing to bring the suit. The dismissal was reversed in State of Delaware v. Florida First National Bank of Jacksonville, 381 So.2d 1075 (Fla. 1st DCA 1979). In 1980, the parties entered into a "Stipulation and Settlement Agreement" in which the valuation of the Trust assets was settled for 1978 and 1979. For years after 1979, it was agreed that the net income of the Trust or 3 percent of the fair market value of the Trust assets, whichever was greater, would be paid to Nemours. The Trustees would be bound to the prudent trustee's rule to try to raise the Trust income above 3 percent.

For 1980, the Trustees relied upon a $5,500.00 per share fair market value of the St. Joe stock made by an expert appraiser, First Research Corp. This per-share figure was based upon an appraisal requested by St. Joe to calculate the intangible tax due the State of Florida for 1980. First Research valued the St. Joe stock at $5,500.00 per share after applying a 30 percent discount due to non-marketability to the $7,700.00 per share value which was based upon an appraisal of St. Joe's assets.

Following execution of the Stipulation and Settlement Agreement and Ball's death, Delaware amended its complaint twice, with the third amended complaint forming the basis for this action. Delaware charged that the Trustees had not acted in the beneficiaries' best interests, nor had they carried out duPont's intent. Count I charged a breach of the Stipulation and Settlement Agreement by the Trustees' failure to make a fair market valuation of the St. Joe stock when they accepted the First Research appraisal, by the Trustees' retention of underproductive assets, St. Joe stock, and by the Trustees' failure to raise Trust income above 3 percent of the total value of the Trust corpus. Count II sought reimbursement of all funds due by the Trustees' failure to act as prudent trustees in retaining underproductive assets and sought removal of Belin, Coldewey, Thornton and Jacksonville National Bank as Trustees. Count III charged a conflict of interests in the Trustees'...