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In re Trust Created Under the Will of Schutt

Court of Chancery of Delaware

July 17, 2017

IN THE MATTER OF Trust Created Under the Will of Harold S. Schutt

          Date Submitted: March 1, 2017

          Oral Draft Report: March 1, 2017

          Submitted after Briefing on Exceptions: May 9, 2017

          Jerome K. Grossman, Esquire, Richard J.A. Popper, Esquire, and Curtis J. Crowther, Esquire, of YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; Attorneys for Petitioners Charles P. Schutt, Jr., Eliza B. Hurlbut and Caroline B. Lintner.

          William H. Lunger, Esquire, of MARTIN & LUNGER, P.A., Wilmington, Delaware; Attorneys for Petitioners Erik F. Streitwieser, Charles E. Streitwieser, Bernhard T. Streitwieser and Christiane C. Bunn.

          Scott E. Swenson, Esquire, Gregory J. Weinig, Esquire and Daniel R. Stanek, Esquire, of CONNOLLY GALLAGHER LLP, Wilmington, Delaware; Attorneys for Respondent Beneficiaries Nathalie (Strong) Givens, Pamela C. (Strong) Whitmore, Kristine Schutt Sindelar, Robert Haden, Clifford S. Schutt, Peter A. Rogstad, Diana J. Bomberg, Christina Rogstad, Lisa Rogstad Blair, Lief Rogstad, Melinda Rogstad Schaum, Teresa Protzeller-Lewis, Sue M. Drewry, Timothy Protzeller, Mark Protzeller, Stephen Protzeller, Michael Protzeller, Thomas R. Protzeller, Bruce Protzeller, Matthew Stokes, Cynthia Dufour and Barbara Wright.

          Thomas W. Briggs, Jr., Esquire, Todd A. Flubacher, Esquire and Matthew R. Clark, Esquire, of MORRIS NICHOLS ARSHT & TUNNELL, LLP, Wilmington, Delaware; Attorneys for Respondent Co-Trustees Wilmington Trust Company and Christopher Simon.

          MASTER'S REPORT

          Morgan T. Zurn, Master in Chancery

         This case presents a dispute between different branches of a testator's family as to the meaning of trust language indicating more distant, unnamed relatives would receive the trust principal before more immediate named relatives. A testator who intends to leave his estate to persons who are unidentifiable when he drafts his testamentary documents will necessarily use language requiring some interpretation to identify the eventual beneficiaries. In this case, the testator's more immediate relatives rely on that need for interpretation to assert an ambiguity that would permit them to take over the more distant relatives. I conclude that the trust language at issue is not ambiguous and expresses the testator's intent to benefit the more distant relatives. For the reasons that follow, I recommend that the immediate relatives' motion for summary judgment be denied, and the distant relatives' motion for summary judgment be granted.

         I. Background

         This action concerns a trust created under the will of Harold S. Schutt ("Harold") dated March 17, 1960 ("Harold's Trust").[1] Harold's Trust terminated when the last income beneficiary died without issue on June 17, 2013. Upon termination of Harold's Trust, pursuant to Item VII(g)(2), the balance of the trust principal was to be paid in equal shares, per stirpes, as follows:

to my then living issue, other than issue of my son, Charles Porter Schutt by his wife, Phyllis duPont Schutt; or in default of such issue of mine, shall pay over such principal in equal shares, per stirpes, to the person or persons who would have been entitled to inherit the same from me under the intestate laws of the State of Delaware pertaining to personal property of mine had I died at the time intestate, unmarried, possessed of such principal and not survived by any issue of my said son Charles Porter Schutt by his wife Phyllis duPont Schutt or by my nephew, David S. Foster, or any of his issue; or in default of such issue of mine and such persons, shall pay over such principal to the then living issue of my said son Charles Porter Schutt by his wife Phyllis duPont Schutt; or in default of such issue of mine, such persons, and such issue of my said son, shall pay over such principal to or for such charitable uses as Trustees shall in their sole discretion deem appropriate. [2]

         Harold's only living issue as of June 17, 2013, when the Trust terminated, are the issue of Charles Porter Schutt by his wife, Phyllis duPont Schutt ("CPS Beneficiaries"). Petitioners in this action are all CPS Beneficiaries. Respondents are members of the class Harold defined as "the person or persons who would have been entitled to inherit the same from me under the intestate laws of the State of Delaware, " who I will refer to as "Intestate Beneficiaries." The Intestate Beneficiaries are the issue of Harold's first cousins.[3]

         On January 22, 2015, petitioners filed a Verified Petition for Instructions explaining that the trustees of Harold's Trust were attempting to identify Intestate Beneficiaries, and asked the Court to direct distribution of the Trust principal to the CPS Beneficiaries. The trustees identified potential Intestate Beneficiaries, and several entered their appearance. On May 7, 2015, the CPS Beneficiaries filed an amended petition, naming Intestate Beneficiaries as respondents and again asking the Court to distribute the Trust principal to the CPS Beneficiaries. On June 8, 2015, the co-trustees filed an answer to the amended petition and asked the Court not to distribute the principal as the CPS Beneficiaries requested. Notice was given to additional potential Intestate Beneficiaries, and a larger group of Intestate Beneficiaries answered the amended petition and asked the Court to order distribution of the principal under Delaware's intestacy laws were Harold not survived by any CPS Beneficiaries. The parties proceeded to discovery.

         The CPS Beneficiaries filed a motion for summary judgment on November 28, 2016, and the Intestate Beneficiaries responded and filed their own motion for summary judgment on December 28, 2016. Each motion asserted Harold's Trust should be interpreted so that the Trust's remaining principal would be distributed to the movant. The motions were fully briefed and oral argument was held on March 1, 2017, where I issued an oral draft report in favor of the Intestate Beneficiaries. The CPS Beneficiaries took timely exception, and the parties briefed those exceptions. This is my final report.

         II. Analysis

         It is undisputed that the class of intestate heirs Harold described in his Trust must be bounded in some way, because Harold also described a third and fourth class of beneficiaries to take in the event the intestate class failed. It is also undisputed that Delaware's intestacy laws, both at the time Harold drafted his Trust and today, do not limit the degree of consanguinity required for a relative to be an intestate heir.[4] The CPS Beneficiaries assert that Harold's class of intestate heirs defined by Delaware law is problematic because it can never fail, and that the circumstances under which Harold drafted his Trust create a latent ambiguity that justifies looking to extrinsic evidence to interpret and limit Harold's class of intestate heirs. The Intestate Beneficiaries assert Item VII(g)(2) is not ambiguous, because even under the intestate laws of the State of Delaware, the category of intestate heirs is bounded and may fail. The Intestate Beneficiaries also argue that the CPS Beneficiaries' extrinsic evidence is too speculative to require a different interpretation.

         Summary judgment is granted where there is no genuine issue of material fact in dispute and the movant is entitled to judgment as a matter of law.[5] Where, as here, there are cross motions for summary judgment and neither party argues that there is an issue of material fact, the Court considers the cross motions a stipulation for a decision based on the submitted record.[6]

         The issue presented is what Harold intended by Item VII(g)(2). The standard for determining intent requires the Court to examine the language of the will as a whole, in light of the circumstances surrounding its creation. When the terms of the document are clear and unambiguous, the Court must enforce the terms as they are written, and cannot consider extrinsic evidence to interpret those terms.[7] No word or phrase should be rejected or treated as superfluous, redundant, or meaningless if it can be given a [8]meaning which is reasonable and consistent with the object and purpose of the writing considered as a whole.[] The Court will prefer an interpretation that gives effect to each term of an agreement.[9] Where "extrinsic facts appear which produce or develop a latent ambiguity not apparent upon the face of the will itself, since the ambiguity is disclosed by the introduction of extrinsic facts, the court may inquire into any other material extrinsic fact or circumstance to which the will certainly refers, as well as to the relation occupied by the testator to those facts, to the end that a correct interpretation of the language actually employed by the testator in his will may be arrived at."[10]

         A. The draft report concluded Harold's Trust unambiguously stated Harold's intent that the trust principal ...


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