IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

EFiled: Apr 20 2009 1:23PM EDT Transaction ID 24767965 Case No. 3192-CC IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN THE MATTER OF LAMMOT ) DU PONT COPELAND TRUST NO. 5400 ) Civil Action No. 3192-CC DATED MARCH 12, 1956, AND THE ) LAMMOT DU PONT COPELAND ) TRUST UNDER AGREEMENT DATED ) APRIL 25, 1955 ) MEMORANDUM OPINION Date Submitted: March 13, 2009 Date Decided: April 20, 2009 John E. James, Michael B. Rush, of POTTER, ANDERSON, & CORROON LLP, Wilmington, Delaware, Attorneys for Petitioner Gerret van S. Copeland, Jr. Michael P. Kelly, Christopher A. Selzer, Jameson A. L. Tweedie, of MCCARTER & ENGLISH, LLP, Wilmington, Delaware, Attorneys for Respondents. CHANDLER, Chancellor

This case presents, on summary judgment, the narrow question of whether the assets of two trusts, upon their future termination, are to be distributed to their beneficiaries per stirpes or per capita. Petitioner Gerret van S. Copeland, Jr. filed this petition seeking instruction on the interpretation of two trusts formed by Lammot du Pont Copeland ( Trustor ) in 1955 and 1956. In his petition, petitioner asks this Court to instruct the trustee of the two trusts, J.P. Morgan Trust Company of Delaware ( J.P. Morgan ), on how it should distribute the assets of the trusts upon their termination. Petitioner contends that the trusts relevant language is ambiguous and therefore, according to applicable Delaware law, this Court should favor a per stirpes distribution over a per capita distribution. Respondents argue that the relevant language of the two trusts is clear and unambiguous and properly sets forth the intent of the Trustor to distribute his assets to his grandchildren as a class, and per capita. I agree with respondents interpretation. After reading the parties voluminous submissions and fully considering all the arguments, I conclude, for the reasons set forth below, that the relevant language of the trusts is clear and unambiguous and that the future distributions to the Trustor s grandchildren should be made per capita. 1

I. BACKGROUND 1 Acting for the benefit of his family and friends, the Trustor created, among others, two trusts. The two trusts at issue in this case are the Lammot du Pont Copeland Trust for the Benefit of the Copeland Andelot Foundation, Inc. (the 1955 Trust ) and the Lammot du Pont Copeland Trust No. 5400 (the 5400 Trust ). Given that these two trusts form the sole basis of the issues in this case, I narrow the discussion to these two trusts and describe them in more detail below. A. The 1955 Trust The Trustor created the 1955 Trust on April 25, 1955, appointing the Wilmington Trust Company as trustee. The 1955 Trust provides that the net income from the 1955 Trust was to be paid to the Copeland Andelot Foundation, Inc. (the Foundation ), for a period of thirty years. After thirty years, and until one year after the death of the last surviving child of the Trustor, the income is to be paid in equal shares... unto Trustor s grandchildren, including grandchildren born after the expiration of said thirty years, the issue of any deceased grandchild to take per stirpes the share of such income such deceased grandchild would have taken if living. 2 In accordance with the 1955 Trust, the Trustee is currently distributing the trust income to the grandchildren in equal shares, that is, per 1 The parties have filed cross motions for summary judgment and have not presented argument to the Court that there is any issue of material fact under Court of Chancery Rule 56(h). Thus, I describe these undisputed facts as given by the parties in their submissions to the Court. 2 Ex. B Art. I (emphasis added). 2

capita. The 1955 Trust provides that it shall terminate upon the expiration of thirty years, or upon the expiration of one year following the death of the last survivor of Trustor s children, whichever is later. 3 The 1955 Trust has not yet terminated. Although the thirty year period has expired, all three of the Trustor s children are living. Wilmington Trust Company was removed as Trustee of the 1955 Trust and J.P. Morgan was appointed as the successor Trustee. As of February 2008, the market value of the 1955 Trust was $14,637,975.56. B. The 5400 Trust The Trustor created the 5400 Trust on March 12, 1956, appointing Equitable Security Trust Company as trustee. Under the terms of the 5400 Trust, following the death of the Trustor, the Trustee was required to pay premiums on certain insurance policies for the Trustor s qualifying employees. 4 The Trust further provides that if the net income from the 5400 Trust in any calendar year following the death of the Trustor exceeds the distributions required to be made under Section 1 of Article III, the Trustee must accumulate the excess income until there is a reserve equal to at least two years of premiums. Once a reserve of at least two years of premiums is fully funded, the Trustee may, in its complete discretion, either distribute the trust income to any one or more than one of the class of persons consisting of descendants of Trustor and their spouses in such proportions 3 Id. 4 Ex. A Art. III. 3

and at such time or times as determined by Trustee in it sole discretion, or to accumulate any such income and add it to the principal of the trust fund. 5 PNC Bank, Delaware, the successor to Equitable Security Trust Company, was replaced as Trustee of the 5400 Trust with J.P. Morgan. To date, the reserve has been fully funded. The Trustee has exercised its discretion and chosen to make distributions of the trust income. Initially, the Trustee inquired whether the Trustor s three children wanted to receive the income, but they declined. The Trustee then chose to distribute the income equally to the Trustor s ten grandchildren. The 5400 Trust provides that it is irrevocable and shall terminate upon the last to occur of the following events: (a) the death of the Trustor; (b) the date on which the last premium payment is required to be made by the Trustee to the trustees of the Employees Trusts; or (c) the death of the survivor of Trustor s three children. The Trustor died in 1983, but neither of the remaining two events described have occurred. All three of Trustor s children are living, and payments are still being made to the grandchildren. As of January 2007, the market value of the 5400 Trust was $7,341,865.22. C. The Parties When the trusts were established the Trustor was approximately 50 years of age and married to his wife, Pamela C. Copeland. When Trustor established the 5 Ex. A Art. III. 4

Trusts, he had three children Lammot, Jr., Louisa and Gerret who ranged from their teenage years to early twenties. At the time he established the Trusts, the Trustor did not have any grandchildren. By the time of his death on July 1, 1983, the Trustor had ten grandchildren, but no great-grandchildren. Since Trustor s death, twenty-one great-grandchildren have been born. To date, none of Trustor s children, grandchildren or great-grandchildren has died. All three of his children are alive. Lammot du Pont Copeland, Jr. is 76 years old; Louisa C. Duemling is 72; Gerret van S. Copeland is 69. Trustor was also survived by ten grandchildren, who range in age from 39 to 50 years old. Petitioner is one of two children of Gerret van S. Copeland. Respondents are the five children of Lammot du Pont Copeland, Jr. Louisa C. Duemling has three children, none of whom is a party to this Action. II. ANALYSIS Generally, summary judgment will be granted if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. 6 The evidence and the inferences drawn from the evidence are to be viewed in the light most favorable to the non-moving party, and summary judgment will be denied where the proffered 6 Twin Bridges Ltd. P ship v. Draper, 2007 WL 2744609, at *8 (Del. Ch. Sept. 14, 2007) (citing Ct. Ch. R. 56(c)). 5

evidence provides a reasonable indication that a material fact is in dispute. 7 In this case, however, since the parties have filed cross motions for summary judgment and have not presented argument to the Court that there is any issue of material fact pursuant to Court of Chancery Rule 56(h), the Court shall deem the motions to be the equivalent of a stipulation for decision on the merits based on the record submitted with the motions. 8 In analyzing the meaning of the language of a trust, the Court will begin its analysis with the seminal rule of construction in trust cases: that the settlor s intent controls the interpretation of the instrument. 9 The Trustor s intent is determined by considering the language of the trust instrument, read in its entirety, in light of the circumstances surrounding its creation. 10 Additionally, the Court should rely on two guiding principles in responding to a petition for instructions: 1) where the language of a will [or trust] is unambiguous, the court must enforce its terms as written; and 2) where the language used in a [trust] is ambiguous, the court must give the language that meaning which will effectuate 7 Mickman v. American Intern. Processing, LLC, 2009 WL 891807, at *1 (Del. Ch. Apr. 01, 2009) (citing Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962)). 8 Ct. Ch. R. 56(h). 9 Annan v. Wilmington Trust Co., 559 A.2d 1289, 1292 (Del. 1989) (citing Dutra de Amorim v. Norment, 460 A.2d 511, 514 (Del. 1983)); Fiduciary Trust Co. of New York v. Fiduciary Trust Co. of New York, 445 A.2d 927, 980 (Del. 1982). 10 Annan, 559 A.2d at 1292 (quoting Dutra de Amorim, 460 A.2d at 514) (emphasis added). 6

the intent of the [settlor]. 11 Ultimately, the intent of the settlor is controlling, and discovery of that intent is the goal of the fact finder in such cases. To find that intent, we turn to the relevant language in both the 1955 Trust and the 5400 Trust: Trustee shall assign, transfer, convey and deliver the trust fund as the same may then be constituted, principal and undistributed income thereof, if any, free from this trust [free and clear of trust], unto Trustor s then living grandchildren, the issue of any deceased grandchild to take per stirpes the share such deceased grandchild would have take if living. 12 Petitioner argues that the language in the trusts is ambiguous because it provides no guidance as to whether the distributions should be made on a per stirpes or per capita basis. 13 Petitioner cites case law that demonstrates that when the language of a trust is ambiguous as to whether distributions should be made on a per stirpes or a per capita basis, that Delaware law favors a stirpital distribution. 14 While I agree that Delaware law contains a somewhat weak presumption that, in cases of ambiguity, the language of a trust will be interpreted 11 Estate of Skwarlo, 2001 WL 312451, at *1 (Del. Ch. Mar. 12, 2001) (Master s report) (citing Bird v. Wilmington Soc. of Fine Arts, 43 A.2d 476, 480 (Del. 1945)). 12 Ex. A Art. III; Ex. B Art. I (emphasis added). As indicated by the parenthesis, in the 5400 Trust the words free and clear of trust are used, whereas in the 1955 Trust the words free from this trust are used. Otherwise the language is identical. 13 The term per capita denotes that a trustor or settlor was manifesting the intent that some portion of the trust corpus be distributed in equal shares. See, e.g., Black s Law Dictionary, 5 th ed. (1979) (stating that per capita is a synonym for share and share alike ). 14 See, e.g., In re Trust U.D. Frances D. Asbury, 2003 WL 22232599, at *2 (Del. Ch. Sept. 12, 2003) (noting that under Delaware law that a per stirpes distribution is therefore favored over a per capita distribution ). 7

in favor of a stirpital distribution, 15 petitioner erroneously maintains that the language of the trusts is sufficiently ambiguous as to prohibit the understanding of the Trustor s intent. To the contrary, I conclude that both the language of the trusts and the scheme of the distributions as set forth when viewing the documents in their entirety clearly reveal the intent of the Trustor. Petitioner principally relies on Mendenhall v. Daum. In Mendenhall, the Court was confronted with what it termed obviously ambiguous testamentary language. 16 To confront the ambiguity, and properly interpret the intent of the testator, the Court used the following standard for interpreting testamentary instruments: The law and legal principles governing the interpretation of wills is well settled, but their application to poorly or ambiguously drawn wills is often difficult. The pertinent principles may be thus briefly summarized: a testator s intent, unless unlawful, shall prevail; that intent shall be ascertained from a consideration of (a) all the language contained in his will, and (b) his scheme of distribution, and (c) the circumstances surrounding him at the time he made his will, and (d) the existing facts, and (e) canons of construction will be resorted to only if the language of the will is ambiguous or conflicting or the testator s intent is for any reason uncertain. 17 The Mendenhall Court, after conducting the above analysis, concluded that the language was ambiguous, yet the analysis is still applicable in this case. 15 The favor that Delaware grants per stirpes distributions is based on the assumption that it is not to be lightly assumed that [the trustor] intended a more remote relative to share equally with a near relative. In re Adkins Estate, 55 A.2d 145, 147 (Del. 1947) (citations omitted). 16 Mendenhall v. Daum, 1978 WL 4978, at *1 (Del. Ch. Oct. 11, 1978). 17 Id. at *2 (citing In Re Estate of Carter, 257 A.2d 843, 845 (Pa. 1969)). 8

To understand the Trustor s intent, I first turn to the language contained in the trusts. The provision of the trusts cited above contains the language, unto Trustor s then living grandchildren. 18 I interpret this language as clearly indicating the Trustor s intent to denote the grandchildren as a class. On its face, the language refers to the grandchildren as a whole and complete entity and does not name any one individual separately. This would suggest that the grandchildren are one unit or class. Further, the Trustor, as a sophisticated businessman and experienced creator of trusts, specifically used the phrase per stirpes to indentify how a great-grandchild would take if one of the grandchildren died before the trusts assets were distributed. Given the sophistication of the Trustor and his specific use of the phrase per stirpes for the great-grandchildren, it appears that if the Trustor intended the grandchildren to take per stirpes than he would have specifically used that phrase. In other words, the absence of the phrase per stirpes connotes that the Trustor intended the opposite outcome a per capita distribution. In looking at the trust documents in their entirety, I find further evidence that the Trustor intended the grandchildren to take per capita. The 1955 Trust states: Upon the expiration of thirty years from the date hereof, Trustee shall thereafter, and until the expiration of one year following the death of the last survivor of Trustor s children, pay over the net income of the 18 Ex. A Art. III; Ex. B Art. I. 9

trust fund, in equal shares and subject to the provisions of paragraph 2 hereof, unto Trustor s grandchildren.... 19 In this case, the Trustor provided that the grandchildren would be entitled to the income generated by the 1955 Trust and that income would be distributed in equal shares or per capita. This is further evidence that the Trustor intended that his grandchildren would take per capita upon termination and distribution of the 1955 Trust. The 5400 Trust also contains evidence that the Trustor intended to make a distribution to his grandchildren as a class. In the document governing the 5400 Trust the Trustor provided: Trustee shall be authorized and empowered in its discretion to pay over that portion of net income derived from the investment of the trust fund during such calendar year which is in excess of said amounts to any one or more than one of the class of persons consisting of descendents of Trustor and their spouses.... 20 The word class referred to, among others, Trustor s grandchildren. Thus, the Trustor thought of his grandchildren as a class and intended to provide for them accordingly. This is further evidence, taken from the governing document of the 5400 trust, that the Trustor intended to distribute the assets of the 5400 trust to his grandchildren as a class. 19 Ex. B Art. I (emphasis added). 20 Ex. A Art. III (emphasis added). 10

Given that I conclude that the Trustor intended to distribute the assets of the trusts to his grandchildren as a class, Delaware law is clear that distribution to a class infers that the class gift be distributed equally among the members of the class or, in other words, a per capita distribution. Indeed, Delaware courts have a long history of interpreting class gifts as per capita distributions. 21 In Bank of Delaware v. Kane s Estate, the Court stated: A gift to a class is classically defined as a gift of an aggregate sum to a body of persons, uncertain in number at the time of the gift, to be ascertained at a future time, and who are all to take in equal or some other definite proportions, the share of each being dependent for its amount upon the ultimate number. 22 In this case, the Trustor gave a class gift to his grandchildren. Thus, following applicable Delaware law, the Trustor s grandchildren, as a class, are entitled to take the gift per capita. If, for some reason, the plain interpretation of the language of the trusts was insufficient to understand the intent of the Trustor, then I would next turn to the scheme of the distribution. The scheme of the distribution in both of the trusts evidences the Trustor s intent to eventually distribute the assets of the trusts to the grandchildren as a class and in equal shares. Contrary to the factual circumstances 21 One-hundred years ago, the Court in In re Nelson s Estate concluded that because the particular distribution in that case was a gift to a class, the beneficiaries should take per capita and not per stirpes. In re Nelson s Estate, 74 A. 851, 856-57 (Del. Ch. 1909). Similarly, eightyfive years later in Estate of Hall, the Court found that a class gift to the grandchildren of the testator was to be equally distributed among the grandchildren. See Estate of Hall, 1994 WL 469227, at *1 (Del. Ch. Aug. 16, 1994). 22 Bank of Delaware v. Kane s Estate, 285 A.2d 440, 442 (Del. Ch. 1971). 11

in Mendenhall v. Daum and In re Trust U.D. Frances D. Asbury, upon which petitioner extensively relies, this action does not address a gift to beneficiaries of differing relations to the trustor or testator. Instead, this case deals with gifts initially provided to entities and individuals outside of the family with any residual distribution granted to a specific group (the grandchildren) within the family. In Asbury, the Master noted that his interpretation of the trust at issue in that case avoid[ed] an odd result of... more remote relations receiving the same benefit as those with closer ties of the blood. 23 That phenomenon is not issue in this action. The Trustor specifically crafted the language of the trusts to grant the distribution to the grandchildren upon the termination of the gift (at a specified time) to the outside party. The Trustor was clear in his intentions to bypass the children. Thus, the scheme in this action supports the notion that the Trustor clearly intended to distribute the assets of the trusts to his grandchildren as a class. The intent of the Trustor is clear and unambiguous in that he intended to create a class gift to his grandchildren and the issue per stirpes of any grandchildren who die before the trusts terminate. It was not the intent of the Trustor to favor particular grandchildren to the detriment of the other grandchildren. If so, he could have named those grandchildren with specificity, as all of the grandchildren had been born before the Trustor died. Petitioner s 23 Asbury, 2003 WL 22232599 at *3. 12

analysis that the language of the trusts creates an ambiguity that must be resolved by construction presumptions is flawed. The language of the relevant provisions in the trusts is clear regarding the Trustor s intent, and the language of the trust documents in their entirety and the overall scheme of the distributions provide evidence that the Trustor intended his grandchildren to take as a class equally. Turning to an ancillary issue, respondents raised certain procedural concerns in their briefs. Chief among those concerns is that since all interested parties are not before the Court in this action (although they have notice of it) this decision may not be binding on those parties. To the contrary, the Court s decision is binding on all interested parties seeking to recover under the 1955 Trust or the 5400 Trust. The parties should confer and agree upon a specific order implementing this decision. III. CONCLUSION This case presents the narrow question whether the assets of two trusts, upon their future termination, are to be distributed to their beneficiaries per stirpes or per capita. I conclude that assets of the 1955 Trust and the 5400 Trust, upon their future termination, were intended to be distributed to the Trustor s grandchildren on a class-wide, per capita basis. 13