Wilmington Trust Company v. Mills

• Court: Court of Chancery of Delaware
• Decided: June 25, 2021
• Docket: C.A. No. 2019-0690-JTL
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

WILMINGTON TRUST COMPANY as ) Trustee of the A. FELIX DU PONT Trust ) dated December 28, 1934, Trust No. 2108 ) f/b/o Phyllis Mills Wyeth, ) ) Petitioner, ) ) v. ) C.A. No. 2019-0690-JTL ) JAMES PAUL MILLS JR. and MARY ) CHICHESTER MILLS ABEL-SMITH, ) JAMES B. WYETH, solely in his capacity ) as the Executor of the Estate ) of Phyllis Mills Wyeth, and THE WYETH ) FOUNDATION, ) ) Respondents. )

MEMORANDUM OPINION

Date Submitted: April 26, 2021 Date Decided: June 25, 2021

Vincent C. Thomas, Kevin A. Guerke, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, Delaware; Attorneys for Petitioner.

P. Clarkson Collins, Jr., James J. Gallagher, Bryan Townsend, MORRIS JAMES LLP, Wilmington, Delaware; Attorneys for Respondent James Paul Mills, Jr.

Matthew P. D’Emilio, Joseph L. Christensen, Kerry M. Porter, MCCOLLOM D’EMILIO SMITH UEBLER LLC; Wilmington, Delaware; Attorneys for James B. Wyeth in his capacity as the Executor of the Estate of Phyllis Mills Wyeth.

W. Donald Sparks, II, Chad M. Shandler, Christine D. Haynes, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Attorneys for Respondent The Wyeth Foundation.

LASTER, V.C. The beneficiary of a trust sought to exercise a limited power of appointment in favor

of a charity. Her sibling contends that the exercise was invalid because it exceeded the

scope of the grant of authority in the original trust agreement. The trustee filed a petition

for instructions. The parties filed cross-motions for judgment on the pleadings. This

decision holds that the exercise of the power was invalid.

I. FACTUAL BACKGROUND

The facts are drawn from the parties’ cross-motions for judgement on the pleadings

and the documents they incorporate by reference. The vast majority of the facts are

undisputed, except for the facts pertaining to certain equitable defenses.

A. The Trust Agreement

Under a trust agreement dated December 28, 1934 (the “Trust Agreement”), Felix

Du Pont established a trust that named his daughter, Alice du Pont, as the life beneficiary.

Wilmington Trust Company served as trustee (the “Trustee”) and designated the trust as

“Trust No. 2108.”

Section 1 of the Trust Agreement granted Alice the following limited power of

appointment:

Upon the death of Trustor’s said daughter, Alice F. du Pont, Trustee shall assign, transfer, convey and deliver this trust fund, principal and undistributed income thereof, if any, free from this trust, unto the widower of said Alice F. du Pont, and/or unto the lawful issue of said Alice F. du Pont, in such manner and amounts and upon such trusts, terms and conditions as said Alice F. du Pont shall have appointed by the last instrument in writing which she shall have executed and delivered during her lifetime to Trustee, or failing such instrument in her last Will and Testament, or in default of any such appointment then unto her living issue, if any per stripes not per capita. . . . Pet. Ex. A § 1 (the “Original Limited Power”).1

The Trust Agreement also contained a provision specifying what would happen if

Alice did not exercise the Original Limited Power (a “Default Provision”). The Trust

Agreement stated that “failing such instrument by her Last Will and Testament, or in

default of any such appointment,” then the trustee would distribute the property “unto her

then living issue, if any, per stripes and not per capita.” Id. (the “Original Default

Provision”).2

B. Alice Exercises The Original Limited Power.

Alice had three children: Phyllis Mills Wyeth, who is deceased, and James Paul

Mills Jr., and Mary Chichester Mills Abel-Smith. Between 1973 and 1986 Alice exercised

the Original Limited Power in favor of Phyllis, James, and Mary on four occasions.

1 In text omitted from the quotation, the Trust Agreement made the Original Limited Power “subject however to the provisions of paragraph ‘2’ hereof.” That paragraph provided that if a beneficiary had not reached age twenty-five by the time a distribution was to be made, then the beneficiary’s share of the trust would be held in further trust until the beneficiary reached age twenty-five. Pet. Ex. A ¶ 2. At that point, the trust fund would be distributed to the beneficiary outright. Id. As events transpired, the limitations in paragraph 2 did not become applicable, and the provision plays no role in this proceeding. 2 As with the Original Limited Power, in text omitted from the quotation, the Trust Agreement made the Original Default Provision “subject however to the provisions of paragraph ‘2’ hereof.” Pet. Ex. A ¶ 2. Once again, the limitations in paragraph 2 did not become applicable, and the provision plays no role in this proceeding.

2 1. The 1973 Exercise

Alice first exercised the Original Limited Power in an instrument dated February

12, 1973. Wyeth Ans. Br. Ex. A (the “1973 Exercise”). In that instrument, Alice treated

Phyllis, James, and Mary identically.

The 1973 Exercise provided that upon Alice’s death, “the Trustee shall divide the

trust fund [of Trust No. 2108] into as many equal shares as there are children of [Alice]

then living ....” Id. art. SECOND, ¶ (b). The 1973 Exercise instructed the Trustee to hold

and manage each share as a separate trust.3

The 1973 Exercise granted each child the following limited power of appointment

over their respective trusts:

Upon the death of such a child[,]…this separate trust shall terminate, and the principal and accumulated or undistributed income, if any, shall be distributed among the issue of such child ... in such proportions and manner (in trust or otherwise) without regard to equality and to the exclusion of any, as he shall appoint by the last instrument in writing which he shall have executed and delivered to the Trustee during his lifetime, or failing such instrument by his Last Will and Testament. . . .

Id. art. SECOND, ¶ (b)(1)(D) (the “Second Limited Power”). The 1973 Exercise defined

“issue” in terms of Alice’s “lawful blood descendants,” and it explicitly excluded adopted

children. Id. art. FIFTH ¶¶ (a) & (a)(1). The Second Limited Power thus gave Phyllis,

3 The 1973 Exercise addressed two other possibilities. One was that at the time of her death, Alice’s husband might still be living. Another was that at the time of her death, Alice might have one or more children who had predeceased her and who also had living issue. Those possibilities did not come to pass, so this decision omits the relevant text.

3 James, and Mary the power to appoint their trusts to their lawful blood descendants,

whether in trust or otherwise.

The 1973 Exercise contained the following Default Provision:

To the extent a child of Grantor does not appoint, the trust property shall be distributed to the issue, per stirpes, of such deceased child….To the extent a child of the Grantor does not appoint and is not survived by issue, such property shall be distributed to the then surviving issue of Grantor, per stirpes...

Id. art. SECOND ¶ (b)(1)(D). The Default Provision in the 1973 Exercise did not expressly

address what would happen if a child attempted to exercise the Second Limited Power but

did so ineffectively.

The 1973 Exercise contained a provision designed to prevent the instrument from

violating the rule against perpetuities (a “Perpetuities Provision”). It stated:

Notwithstanding any other provisions of this Trust Agreement, each of the trusts created under Article SECOND shall terminate at the end of twenty (20) years and eleven (11) months after the death of the last survivor of the Grantor, the Granter’s husband, all children and grandchildren who are in being as of the date this document is deemed executed.

Id. art. THIRD.

2. The 1976 Exercise

Alice next exercised the Original Limited Power through an instrument dated

January 19, 1976. Wyeth Ans. Br. Ex. B (the “1976 Exercise”). In that instrument, Alice

retained the basic division of Trust No. 2108 into equal shares for her children, but she

treated Phyllis differently than James and Mary. Phyllis had suffered an accident and was

unlikely to bear children, which explained the different treatment.

4 Most significantly, the 1976 Exercise provided that if Phyllis survived Alice, then

Phyllis would receive her share “free and clear of trust.” Id. art. SECOND, ¶ (b)(1) (the

“Direct Distribution Provision”). For Alice and Phyllis, the Direct Distribution Provision

carried both advantages and disadvantages. For one, after Phyllis received her share, she

could do with it as she wished, free of any restrictions that Alice might otherwise impose

if the property were granted in trust. For another, the property no longer would be subject

to the testamentary scheme that Felix originally created. For a third, the Direct Distribution

Provision would result in different tax consequences for Phyllis and for Alice’s estate than

would a distribution in trust.

The 1976 Exercise also changed the definition of “issue” so that the exclusion of

adopted children would not apply to Phyllis. Id. art. FIFTH, ¶ (a)(1) (the “Adopted Child

Proviso”). As a result, if Phyllis both adopted children and died before Alice, then Phyllis’s

adopted children would be treated as Alice’s grandchildren for purposes of the 1976

Exercise, with the result that Phyllis’s share of Trust No. 2108 would be divided into sub-

shares for her adopted children.

The 1976 Exercise granted a limited power of appointment which, in substance,

tracked the Second Limited Power from the 1973 Exercise. The version of the Second

Limited Power that appeared in the 1976 Exercise did not benefit Phyllis, because the

Direct Distribution Provision would result in Phyllis receiving her share outright if she

survived Alice. But the Second Limited Power did potentially benefit Phyllis’s issue,

because if she adopted children and died before Alice, then Phyllis’s share of Trust No.

2108 would be divided into sub-shares for her adopted children, and they would receive

5 their sub-shares in trust with the ability to exercise the Second Limited Power. The Second

Limited Power also benefited James and Mary, because they still received their shares in

trust with the ability to exercise the Second Limited Power.

As with the 1973 Exercise, the 1976 Exercise contained a Default Provision, and it

tracked the provision in the 1973 Exercise. The Default Provision in the 1976 Exercise thus

did not expressly address what would happen if a recipient attempted to exercise the

Second Limited Power but did so ineffectively.

As with the 1973 Exercise, the 1976 Exercise contained a Perpetuities Provision. It

tracked the Perpetuities Provision in the 1973 Exercise.

3. The 1983 Exercise

Alice again exercised the Original Limited Power through an instrument dated

January 12, 1983. Wyeth Ans. Br. Ex. C (the “1983 Exercise”). Alice again treated Phyllis

differently than James and Mary, but Alice substantially revised her donative scheme.

Alice made one change by eliminating the Direct Distribution Provision. In its place,

Alice returned to a distribution scheme in which Phyllis, James, and Mary each received

their shares of Trust No. 2108 in trust. See id. art. SECOND, ¶ (b).

Alice made another change by seeking to provide Phyliss with a broader power of

appointment than her siblings. The basic terms of the power continued to track the language

of the Second Limited Power as it appeared in the 1973 and 1976 Exercises:

Upon the death of such child or grandchild. . . this separate trust shall terminate, and the principal and accumulated or undistributed income, if any, shall be distributed among the issue of such child or grandchild. . . but subject to the limitation contained in Paragraph (c) of this Article SECOND, as he shall appoint by the last instrument in writing which he shall have executed

6 and delivered to the Trustee during his lifetime, or failing such instrument by his Last Will and Testament. . . .

Id. art. SECOND, ¶ (b)(1)(D). The 1983 Exercise retained the Adopted Child Proviso for

Phyllis’s benefit. Id. art. FIFTH, ¶ (a)(1). As a result, Phyllis could adopt children, then

exercise the Second Limited Power for the benefit of her adopted children.

But the 1983 Exercise went further by attempting to expand the Second Limited

Power to grant Phyllis the ability to designate a charity as the recipient of her share of Trust

No. 2108. The 1983 Exercise attempted to accomplish this result by adding the following

language to the Second Limited Power:

[P]rovided, however, that Grantor’s daughter PHYLLIS may exercise any power conferred upon her under this subparagraph in favor of any organization or organizations to which deductible contributions may be made for purposes of federal income or estate tax laws, as well as in favor of her issue, but subject to the limitations contained in Paragraph (c) of this Article SECOND.

Id. art. SECOND, ¶ (b)(1)(D). (the “Original Charitable Proviso”). Only Phyllis benefitted

from the Original Charitable Proviso; James and Mary did not.4

4 The Second Limited Power as framed in the 1983 Exercise referred to “the limitations contained in Paragraph (c) of this Article SECOND.” That paragraph provided as follows:

At any time during the period provided in Paragraph (a) of Article THIRD, Trustee may distribute to any income beneficiary of a trust created under this Article or to the parent or legal guardian of any such beneficiary or apply for the benefit of such beneficiary, all or any portion of the principal of such trust which in the discretion of the Trustee is deemed necessary or appropriate for the support, maintenance or education of such beneficiary.

Id. The reference thus did not affect the scope of the Second Limited Power.

7 Like the 1973 and 1976 Exercises, the 1983 Exercise contained a Default Provision

framed in terms substantively identical to the 1973 and 1976 Exercises. It thus did not

address expressly what would happen if a child attempted to exercise the Second Limited

Power but did so ineffectively

Like the 1973 and 1976 Exercises, the 1983 Exercise also contained a Perpetuities

Provision, but the 1983 Exercise framed it differently. It now stated:

Notwithstanding any other provisions of this document, each of the trusts created under Article SECOND shall, unless sooner terminated under the terms of this document, terminate at the end of twenty (20) years and eleven (11) months after the death of the Grantor’s husband and the issue of Grantor’s father, A. FELIX DU PONT, who were in being on December 27, 1934.

Id. art. THIRD, ¶ (a).

4. The 1986 Exercise

Alice exercised the Original Limited Power for the final time in an instrument dated

July 25, 1986. Pet. Ex. B (the “1986 Exercise”). In that instrument, Alice continued to treat

Phyllis differently than James and Mary.

Like the prior exercises, the 1986 Exercise provided that upon Alice’s death, the

Trustee would divide Trust No. 2108 into equal shares, one for each of Alice’s surviving

children, and hold each share as a separate trust. The 1986 Exercise also retained the basic

framework of the Second Limited Power, framed in terms substantively identical to the

1983 Exercise. The 1986 Exercise also retained the Adopted Child Proviso.

Like the 1983 Exercise, the 1986 Exercise supplemented the Second Limited Power

with a proviso that purported to empower Phyllis to designate a charity as the recipient of

8 her share of Trust No. 2108. The 1986 Exercise, however, added the phrase “to the extent

permissible” to the text. The language now read:

[P]rovided, however, that to the extent permissible Grantor’s daughter PHYLLIS may exercise any power conferred upon her under this subparagraph in favor of any organization or organizations to which deductible contributions may be made for purposes of federal income or estate tax laws, as well as in favor of her issue, but subject to the limitations contained in Paragraph (d) of this Article SECOND.

Id. art. SECOND, ¶ (a)(1)(D) (the “Second Charitable Proviso”) (emphasis added).

Like the earlier instruments, the 1986 Exercise contained a Default Provision.

Unlike the earlier instruments, and consistent with the addition of the phrase “to the extent

permissible” to the Second Charitable Proviso, the 1986 Exercise added language to

address a failure to exercise the Second Limited Power fully and effectively. The Default

Provision in the 1986 Exercise reads as follows:

To the extent a child of Grantor does not fully and effectively appoint, the trust property, to the extent not fully and effectively appointed, shall be distributed to the issue, per stirpes, of such deceased child, subject to the provisions of Article FOURTH; provided, however, that any share of such property passing to any child of such deceased child of Grantor shall be held in further trust. . . . To the extent a child of Grantor does not fully and effectively appoint and is not survived by issue, such property to the extent not effectively appointed shall be distributed to the then surviving issue of Grantor, per stirpes, subject to the provisions of Article FOURTH….

Id. art. SECOND, ¶ (a)(1)(D) (the “Final Default Provision”).

Like the earlier exercises, the 1986 Exercise contained a Perpetuities Provision. The

terms of the Perpetuities Provision in the 1986 Exercise were substantively identical to the

corresponding provision in the 1983 Exercise.

9 The Trustee executed the 1986 Exercise in its capacity as trustee, thereby

acknowledging its existence. The Trustee also agreed to “act in accordance with its terms.”

Mills Reply Br. Ex. B at 18.

C. Phyllis Seeks To Exercise The Second Limited Power.

Alice died on March 13, 2002. Phyllis, James, and Mary survived her. In accordance

with the 1986 Exercise, the Trustee divided Trust No. 2108 into three equal shares, one for

each child, and continued to hold each in trust. This litigation concerns the share allocated

to Phyllis (the “Phyllis Trust”).

By an instrument dated June 6, 2006, Phyllis sought to exercise the Second Limited

Power by relying on the Second Charitable Proviso. Pet. Ex. C (the “2006 Exercise”). The

2006 Exercise recognized the limited scope of the Original Limited Power. In a

WHEREAS clause, it described that power of appointment accurately as follows:

[M]y grandfather conferred upon my mother a limited power to appoint the principal and undistributed income of Trust No 002108 as of the date of her death to and among her widower and/or her lawful issue in such manner and amounts and upon such trusts, terms and conditions as she appointed by the last instrument in writing that she executed and delivered during her lifetime to Trustee, or failing any such instrument, then by her Last Will and Testament....

Pet. Ex. C at 1. The 2006 Exercise thus recognized that the scope of the Original Limited

Power extended only to Alice’s widower and lawful issue; it did not contain a grant of

authority comparable to the Second Charitable Proviso.

The 2006 Exercise also recognized that the source of the Second Charitable Proviso

was the 1986 Exercise. Another WHEREAS clause described the power of appointment

granted by that instrument as follows:

10 [I]n Article SECOND (a)(1)(D)) of the instrument dated July 28, 1986, my mother conferred upon me a limited power to appoint the principal and undistributed income of my one-third share of Trust No 002108 held for my benefit in favor of my issue, or in favor of any organization or organizations to which deductible contributions may be made for purposes of federal income or estate tax laws, as I shall have appointed effectively by the last instrument in writing which I shall have executed and delivered to Trustee during my lifetime, or failing any such instrument, then by my Last Will and Testament.

Id. at 1-2. The 2006 Exercise thus captured the conflict between the Original Limited

Power and the Second Charitable Proviso.

In the 2006 Exercise, Phyllis provided that the corpus of the Phyllis Trust would

pass on her death, free from trust, to The Wyeth Foundation (the “Foundation”), as long as

the Foundation was “then in existence and qualified ... as a charitable organization to which

contributions are deductible.” Id. at 2. She further stated that if the Foundation “is not then

in existence and so qualified, I direct the Trustee under said trust agreement to distribute

the trust fund, free from trust, to such organization or organizations with comparable

purposes then in existence and so qualified as the Trustee shall select.” Id.

The Trustee acknowledged 2006 Exercise. Counsel for the Trustee reviewed the

instrument and regarded it as a valid exercise of the Second Limited Power as expanded

by the Second Charitable Proviso.

Phyllis died on January 14, 2019. She had no children. Her will appointed her

husband, James B. Wyeth, as the executor of her estate (the “Estate”). To avoid confusion

between James Mills and James Wyeth, this decision refers to the latter as the “Executor.”

11 D. James Inquires About Phyllis’s Exercise Of The Second Limited Power.

By letter dated May 23, 2019, an attorney for James sent a letter to the Trustee

raising concerns about whether Phyllis had exercised the Second Limited Power. See Pet.

Ex. D (the “May 2019 Letter”). Counsel asserted that James was “not aware of any specific

purported exercise of Phyllis’s limited power of appointment under the Trust.” Id. at 2.

Counsel posited that if an exercise existed, then “it would have been made, nominally, in

favor of one or more organizations to which deductible contributions may be made for

purposes of federal income or estate tax laws.” Id. In other words, counsel suggested that

Phyllis would have relied on the Second Charitable Proviso.

Counsel maintained that if Phyllis had attempted to appoint a charity as the recipient

of the Phyllis Trust by relying on the Second Charitable Proviso, then the exercise would

conflict with the Original Limited Power. It therefore would have been invalid under

Section 505 of Title 25 of the Delaware Code, which prohibited the holder of a limited

power of appointment from using it to create a subsequent limited power of appointment

that expanded the objects of the original limited power. Counsel maintained that absent a

valid exercise of the Second Limited Power, the corpus of Phyllis’s Trust would be

distributed for the benefit of Alice’s surviving children—James and Mary. Id. at 2.

The Executor and the Foundation have asserted in this litigation that James knew or

should have known that Phyllis relied on the Second Charitable Proviso before his lawyer

wrote the May 2019 Letter. The Executor and the Foundation note that in 2002, when Alice

died, James received his share of Trust No. 2108 in trust under the terms of the 1986

Exercise, which also created the Phyllis Trust and contained the Second Charitable Proviso.

12 The Executor and the Foundation further allege that by 2008 at the latest, James knew or

should have known about Phyllis’s intent to designate the Foundation as the recipient of

the corpus of the Phyllis Trust. The Executor and the Foundation assert that James waited

until after both Alice and Phyllis died before challenging the validity of the 2006 Exercise.

E. This Litigation

On August 29, 2019, the Trustee commenced this action by filing a verified petition

for instructions. The petition named James, Mary, the Foundation, and the Executor as

respondents. The respondents filed answers, and the pleading closed.

James next filed a motion for judgment on the pleadings. He seeks a determination

that the 2006 Exercise is invalid because it conflicts with the Original Limited Power. He

maintains that under the terms of the 2006 Exercise, the corpus of the Phyllis Trust should

be distributed to Mary and himself.

The Foundation opposed James’ motion and filed a cross-motion for judgment on

the pleadings. The Foundation seeks a determination that that the 2006 Exercise is valid

under the plain language of the Second Charitable Proviso. Alternatively, the Foundation

asserts that the 1986 Exercise is ambiguous, requiring discovery to explore Alice’s intent.

The Foundation also maintains that James’ cannot obtain relief on the pleadings because

of an array of equitable defenses. Although the Foundation invokes multiple defenses, each

rests on the premise that James delayed inequitably in challenging the 2006 Exercise.

Finally, the Foundation argues that the 2006 Exercise can only be invalid if the 1986

Exercise was invalid, in which case the Foundation maintains that the Trust Agreement

13 calls for Phyllis’s share to be distributed outright to James, Mary, and the Estate. In that

event, the Executor would control Phyllis’s share.

The Executor also opposed James’ motion and filed a cross-motion for judgment on

the pleadings. The Executor generally takes the same positions as the Foundation, except

he also contends that the Trustee breached its fiduciary duties by failing to raise any issues

about the validity of the Second Charitable Proviso.

II. LEGAL ANALYSIS

The parties have filed cross motions for judgment on the pleadings under Chancery

Rule 12(c). A motion for judgment on the pleading may be granted when there is “no

material issue of fact,” and the movant “is entitled to judgment as a matter of law.” Dessert

Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, LP, 624 A.2d 1199, 1205 (Del.

1993).

“[J]udgment on the pleadings…is a proper framework for enforcing unambiguous

contracts because there is no need to resolve material disputes of fact.” NBC Universal,

Inc. v. Paxton Commc’n Corp., WL 2005 1038997, at *1, *5 (Del. Ch. April 29, 2005).

When reading a contract, the court construes it “in accordance with [its] terms to give effect

to the parties’ intent.” Norton v. K-Sea Transp. P’rs L.P., 67 A.3d 354, 360 (Del. 2013).

To determine the parties’ intent, the court considers “the parties’ words and the plain

meaning of those words.” AT&T Corp. v. Lillis, 953 A.2d 241, 252 (Del. 2008) (internal

quotation marks omitted). When the language is unambiguous, “extrinsic evidence may

not be used to interpret the intent of the parties, to vary the terms of the contract or create

an ambiguity.” Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232

14 (Del. 1997). “A contract is not rendered ambiguous simply because the parties do not agree

upon its proper construction.” Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.3d 728,

739 (Del. 2006).

Just as a court interpreting a contract strives to effectuate the parties’ intent, a court

interpreting a trust agreement strives to effectuate the settlor’s intent. In re Peierls Fam.

Inter Vivos Tr., 77 A.3d 249, 263 (Del. 2013). Just as a court relies on the unambiguous

language of a contract to establish the parties’ intent, a court relies on the unambiguous

language of a trust instrument establishes the settlor’s intent. See id. As when interpreting

a contract, a court gives effect to unambiguous language by applying the ordinary meaning

of the words. DiSabatino v. Diferdinando, 2002 WL 2005743, at *1, *2 (Del. Ch. Aug. 13,

2002). “[T]he Court will not consider extrinsic evidence to vary or contradict express

provisions of a trust instrument that are clear, unambiguous, and subject to interpretation.”

Wilmington Tr. Co. v. Annan, 531 A.2d 1209, 1211 (Del. Ch. 1987).

Given the parallel interpretive principles, a motion for judgment on the pleadings is

an appropriate vehicle for enforcing an unambiguous trust agreement or related donative

instrument, just as it is for an unambiguous contract. As discussed below, the language of

the Trust Agreement and related instruments is plain and unambiguous.

A. The Effectiveness Of The 2006 Exercise

The parties dispute whether Phyllis could rely on the Second Charitable Proviso to

exercise the Second Limited Power for the benefit of the Foundation. As a matter of law,

she could not.

15 Under the common law rule, the holder of a power of appointment (the “first

generation” or “original” power of appointment) can use that power to create a further

power of appointment (the “second generation” or “derivative” power of appointment). As

a matter of law, the holder of the first generation power of appointment cannot create a

second generation power of appointment that confers greater authority than the first

generation power of appointment. If the first generation power of appointment is a limited

power, then those limitations apply to the second generation power of appointment and to

any additional derivative powers of appointment that the second generation holder or

subsequent holders may create. Each power holder can create a derivative power of

appointment with lesser powers by imposing additional restrictions or limitations on the

derivative power, but a power holder cannot create a derivative power of appointment that

expands the power beyond the grant of authority that the power holder received.5

Under the common law rule, if the settlor of a trust creates a first generation power

of appointment and stated that the power only could be used to appoint the corpus of the

trust in favor of a limited class of persons (the “appointees” or “objects” of the power),

then the holder of that power can use it to create a second generation power of appointment

5 Equitable Tr. Co. v. Foulke, 40 A.2d 713, 716 (Del. Ch. 1945); Restatement (Third) of Property: Wills and Other Donative Transfers § 19.14 (Am. Law Inst. 2011) [hereinafter Restatement (Third)]; accord John A. Borron, Jr. et al., 2 Simes and Smith, The Law of Future Interests § 977 (3d ed. & Supp. 2021); Restatement (Second) of Property: Donative Transfers § 19.4 (Am. Law Inst. 1986); Restatement (First) of Property § 359 (Am. Law Inst. 1940); see also Nat. Conference of Comm’rs of Unif. State Laws, Uniform Powers of Appointment Act § 305(c)(3)-(4) (updated Jan. 11, 2019), available at https://www.uniformlaws.org/HigherLogic/System/DownloadDocumentFile.ashx?Docu mentFileKey=eabae880-344b-d919-ac96-87b0091af08a. 16 in favor of any permissible appointee of the first generation power. However, the holder

cannot expand the scope of the second generation power beyond the first by adding

additional objects. See Foulke, 40 A.2d at 716; Simes and Smith, supra, § 977.

The same rule applies to the holder of the second generation power of appointment.

The holder of that power can use it to create a third generation power of appointment in

favor of any of the permissible appointees of the second generation power, but the holder

cannot expand the scope of the third generation power beyond the scope of the second (or

the first) by adding additional objects.

The common law rule applied in Delaware when Felix created the Original Limited

Power, when Alice executed the four instruments that exercised the Original Limited

Power (including the operative 1986 Exercise), and when Phyllis executed the 2006

Exercise. Under the common law rule, Phyllis could not exercise a power of appointment

in favor of the Foundation. The Trust Agreement only authorized the holder of the Original

Limited Power to exercise the power in favor of Alice’s widower or her lawful issue. Alice

could and did exercise her authority under the Original Limited Power to create the Second

Limited Power, but she could not expand the class of appointees who could be objects of

the Second Limited Power. When Phyllis attempted to exercise the Second Limited Power

in favor of the Foundation, she exercised it in favor of an appointee that was not

contemplated by the Original Limited Power. The attempted appointment therefore failed.

17 1. The Trust Agreement Did Not Authorize A Power Holder To Add Appointees

The common law rule against permitting a power holder to add appointees is a

default rule. A settlor can deviate from the common law rule by including express language

in the first generation power of appointment that permits the power holder to add

appointees. The common law authorities framed the rule as a presumption against the

power to add appointees, which the power holder could overcome by pointing to language

in the instrument that supported the existence of that power. See Restatement (Third) §

19.14.

The Foundation claims that the Trust Agreement contained language sufficient to

overcome the presumption, but that view rests on a motivated reading of the Trust

Agreement. According to the Foundation, the Original Limited Power empowered Alice to

add appointees because it provided that the trust fund would be conveyed “in such manner

and amounts and upon such trusts, terms and conditions as [Alice] shall have appointed.”

Pet. Ex. A § 1. The Foundation contends that this language included the power to add

appointees.

In making this argument, the Foundation fails to distinguish between the object of

a power, i.e. the permissible appointees, and the form of property interest that the object of

a power can receive, i.e. property free from trust, in trust, or subject to other terms,

conditions, and limitations. See Equitable Tr. Co. v. James, 47 A.2d 303, 306 (Del. Ch.

1946). The two concepts are distinct. The first refers to the recipient of the property. The

second refers to the extent of the property interest that the recipient receives, traditionally

18 described as the quantum of the estate. See id.; Wilmington Tr. Co. v. Wilmington Tr. Co.,

180 A. 597, 602 (Del. Ch. 1935), modified on other grounds, 186 A. 903 (Del. Ch. 1936).

A grantor can create a power of appointment that is general as to its objects but limited as

to the quantum of estate that the holder can confer. Or a grantor can create a power of

appointment that is limited as to its objects, but unlimited as to the quantum of estate that

the holder can confer. See Foulke, 40 A.2d at 717.

Through the Original Limited Power, the Trust Agreement conferred on Alice a

power of appointment that was limited as to its objects (her widow or lawful issue) but

unlimited as to the quantum of estate that she could confer on those objects (“in such

manner and amounts and upon such trusts, terms and conditions as [Alice] shall have

appointed”). The language that the Foundation cites only addressed the quantum of estate.

It did not address the permissible objects. The language therefore did not authorize Alice

to create additional objects, as she attempted to do through the Second Charitable Proviso.

2. The Appointee Expansion Statute Does Not Change The Result.

The General Assembly has adopted a series of statutes that establish rules governing

powers of appointment. Initially, the statutes codified the common law rule. After Phyllis

died, the General Assembly amended the operative statute to permit the holder of a limited

power to enlarge the class of permissible appointees, unless the instrument creating the

power of appointment specifically said that its holder could not add additional appointees

19 (the “Appointee Expansion Statute”). The Appointee Expansion Statute does not change

the outcome in this case.6

The General Assembly first enacted legislation governing powers of appointment

in 2003. See Del. H.B. 194, 142d Gn. Assem. § 2 (2003). The statute provided as follows:

If the instrument creating a power of appointment, whether limited or general, does not expressly manifest a contrary intent of the donor, the donee of such a power, in addition to exercising the power in any other manner permitted by law and the instrument creating the power, may effectively appoint all or a portion of the assets, subject to such power to a trustee or trustees for the benefit of one or more objects of the power and may, in addition, create in an object of the power a general power of appointment, exercisable during life or at death, over assets subject to the original power or a limited power of appointment, exercisable during life or at death, to appoint such assets among objects all of whom are objects of the original power.

25 Del. C. § 505 (2003). Consistent with the common law rule, Section 505 only permitted

the holder of a limited power of appointment “to appoint such assets among objects all of

whom are objects of the original power.” The power holder could not expand the scope of

the power of appointment by adding new objects.

6 Because the longstanding common law rule prohibited a power holder from adding appointees, and because the Delaware statute codified that common law rule from 2003 until 2019, it would be counterintuitive for a power of appointment to contain a prohibition on the exercise of a power that everyone understood to be non-existent. Rather than expressly stating that the holder of the power could not add appointees, the drafter would rely on the background law and leave the instrument silent on that point. By reversing the default rule, the Appointee Expansion Statute thus likely changed the donative schemes of many settlors, albeit to the benefit of current power holders. This case does not present the question of whether a statute can change retroactively a settlor’s donative scheme.

20 In 2014, the General Assembly amended Section 505 by adding new subsections

and re-designating the original text as subsection (a). In lieu of the term “limited power,”

the General Assembly substituted “nongeneral power.” The statute now read.

Unless the instrument creating a nongeneral power of appointment expressly manifests a contrary intent of the donor, the donee of such a power, in addition to exercising the power in any other manner permitted by law and the instrument creating the power, may effectively appoint all or a portion of the assets subject to such power to a trustee or trustees for the benefit of 1 or more objects of the power and may, in addition, create in an object of the power a general power of appointment, exercisable during life or at death, over assets subject to the original power or a nongeneral power of appointment, exercisable during life or at death, to appoint such assets among objects all of whom are objects of the original power.

25 Del. C. § 505(a) (2014). Consistent with the common law rule, the 2014 version of

Section 505(a) continued only to permit the holder a limited power of appointment—now

termed a nongeneral power of appointment— “to appoint such assets among objects all of

whom are objects of the original power.” The power holder remained unable to expand the

scope of the power of appointment by adding new objects.

Effective June 19, 2019, after Phyllis died and this dispute arose, the General

Assembly amended Section 505(a) again, this time to add the Appointee Expansion Statute.

As a result of the amendment, Section 505(a) currently states:

Unless the instrument creating a nongeneral power of appointment expressly manifests a contrary intent of the donor, the donee of such a power, in addition to exercising the power in any other manner permitted by law and the instrument creating the power, may effectively appoint all or a portion of the assets subject to such power to a trustee or trustees for the benefit of 1 or more objects of the power and may, in addition, create in an object of the power a general or nongeneral power of appointment, exercisable during life or at death, over assets subject to the original power or may create in a person who is not an object of the power a nongeneral power of appointment,

21 exercisable during life or at death, to appoint such assets among objects all of whom are objects of the original power.

25 Del. C. § 505(a) (2019). The Appointee Expansion Statute changed the law so that future

power holders in Alice’s and Phyllis’s positions would be able to use a limited power of

appointment to create a power of appointment “in a person who is not an object of the

power.”

The enactment of the Appointee Expansion Statute does not change the result in this

case. The history of Section 505 shows that in 2003, the General Assembly initially

codified the common law rule, reinforcing the conclusion that when Phyllis executed the

2006 Exercise, she could not appoint her trust to an appointee outside the scope of the

Original Limited Power. The attempt to appoint the Foundation as the recipient of the trust

corpus was therefore invalid.

The enactment of the Appointee Expansion Statute demonstrates instead that it

required a change in the law to authorize what Phyllis attempted to do. A statute was not

necessary; a court ruling could have altered the common law rule. Some change in the law,

however, was needed.7

7 James argued persuasively in his opening brief that the enactment of the Appointee Expansion Provision did not retroactively validate the 2006 Exercise. The Foundation and the Executor did not respond to that argument, which is therefore conceded. This decision accordingly does not address that point.

22 B. The Disposition Of The Phyllis Trust

Because Phyllis could not validly exercise the Second Limited Power in favor of the

Foundation, the court must determine the fate of the Phyllis Trust. There are two possible

results. James relies on the Final Default Provision in the 1986 Exercise, which provided

that if one of Alice’s children failed to exercise the Second Limited Power fully and

effectively, then the property that was not effectively appointed would be distributed to

Alice’s “then surviving issue, per stirpes,” with “then surviving issue” measured at the time

of the child’s death. When Phyllis died, Alice’s “then surviving issue” were James and

Mary, so the property in the Phyllis Trust would go to them. The Foundation and the

Executor rely on the Original Default Provision in the Trust Agreement, which provided

that if Alice failed to exercise the Original Limited Power, then when she died, the Trustee

would distribute the property held in Trust No. 2108 distribute “unto her living issue,” with

“living issue” measured at the time of Alice’s death. Pet. Ex. A, § 1. When Alice died, “her

living issue” were James, Mary, and Phyllis. Under that distribution scheme, Phyllis would

have inherited a one-third share of Trust No. 2108 outright. If Phyllis had continued to

retain the property when she died, then it would have passed to the Estate.

The outcome depends on the validity of the 1986 Exercise. The Foundation and the

Executor maintain that under the rule that prohibits a power holder from expanding the

class of permissible appointees, the Second Charitable Proviso was invalid. James responds

that the plain language of the Second Charitable Proviso made its availability conditional:

Alice granted Phyllis the power to exercise the Second Limited Power in favor of a

charitable organization “to the extent permissible.” Alice likewise provided in the Final

23 Default Provision for a default distribution to the extent that one of her children did not

“fully and effectively appoint” the trust property. James maintains that the 1986 Exercise

validly granted Phyllis the power to exercise authority to the extent it was permissible

under the law at the time she exercised the power. Under the plain language of the 1986

Exercise, James is correct.

1. The Validity Of The 1986 Exercise

The plain language of the 1986 Exercise establishes its validity. The Second

Charitable Proviso granted Phyllis the power to appoint the Phyllis Trust to a charity “to

the extent permissible.” Pet. Ex. B, art. Second(a)(1)(D). The plain meaning of this phrase

granted Phyllis the authority to appoint the Phyllis Trust to a charity only if she could

exercise that authority validly under the conditions in existence when she exercised the

power.

No legal principle restricts a settlor, power holder, or property owner from

anticipating the possibility that at some point in the future, a party may be able to take

action permissibly, regardless of whether or not that action is permissible at the time of

drafting. Conditional and forward-looking language makes the drafter’s intent clear. The

phrase “to the extent permissible” plainly authorizes the holder of the right to exercise it,

if and only if it is permissible to do so. The language protects the instrument itself from

challenge while also eliminating any doubt that the action in question can be taken in the

future if it is permissible.

The Foundation and the Executor vigorously dispute this reading. First, they claim

that the phrase “to the extent permissible” only contemplated the possibility that the rule

24 of perpetuities might foreclose Phyllis from exercising the Second Limited Power. To

support that interpretation, the Foundation and the Executor compare the 1986 Exercise to

the 1983 Exercise, revealing a series of changes in the Perpetuities Provision. It is true that

the 1986 Exercise made those changes, but the “to the extent permissible” language does

not contain any cross reference or limitation that would restrict its application to a

perpetuities issue. It does not say, for example, “to the extent it is permissible to exercise

this power of appointment in accordance with the rule against perpetuities.” Instead, the

1986 Exercise contains specific language that makes the exercise of the Second Limited

Power effective only if permitted by the rule against perpetuities. See Wyeth Ans. Br. Ex.

C, art. Second(a)(1)(D). Interpreting the phrase “to the extent permissible” as referring only

to the perpetuities period would render that language superfluous, which is contrary to

standard canons of construction. See Wilmington Tr. Co. v. Wilmington Tr. Co., 24 A.2d

309, 313 (Del. 1942) (explaining the “general rule of construction that no word or phrase

shall be … treated as superfluous, redundant or meaningless, if to it a meaning can be given

which is reasonable and consistent with the object and purpose of the writing considered

as a whole”).

The phrase “to the extent permissible” is broad and unconstrained. It encompasses

any reason why it might be impermissible or permissible for Phyllis to rely on the Second

Charitable Proviso, and it authorizes Phyllis to appoint the Phyllis Trust in favor of a

charity only “to the extent permissible.” Alice thus validly exercised her authority when

executing the 1986 Exercise. Phyllis, however, failed to validly exercise her authority

permissibly when executing the 2006 Exercise.

25 The Foundation and the Executor next contend that Alice could not have intended

to make the Second Charitable Proviso conditional because she originally included the

Original Charitable Proviso in the 1983 Exercise, and that instrument did not include the

phrase “to the extent permissible.” That is true, and the omission of this phrase is consistent

with the language of the 1983 Exercise when read as a whole, which only expressly

addressed the possibility that a child might fail to exercise the Second Limited Power. The

1983 Exercise, like the two prior exercises, did not expressly contemplate the possibility

that a child might attempt to exercise the power but fail to do so fully and effectively. The

1986 Exercise added language at multiple points to address explicitly the possibility of an

incomplete or ineffective exercise. When read as a whole, the language of the 1986

Exercise plainly contemplates that a child might exercise the Second Limited Power in an

impermissible or ineffective manner, including by attempting to rely on the Second

Charitable Proviso impermissibly. The fact that the 1983 Exercise was not as thorough in

anticipating future possibilities does not undermine the plain meaning of the 1986 Exercise.

See du Pont Weymouth v. Wilmington Tr. Co., 1991 WL 148808, at *1, *3 (Del. Ch. Aug.

2, 1991) (rejecting an argument about the donor’s intent when creating power of

appointment that would “contravene th[e] clear language” of other parts of the trust

agreement when read as a whole).

In their third argument, the Foundation and the Executor maintain that Alice could

not have contemplated that Phyllis might not be able to exercise the Second Limited Power

in favor of a charity because then Phyllis would not be able to exercise the Second Limited

Power at all. They point out that Phyllis could not have children of her own, and they

26 conclude that if Phyllis could not exercise the Second Limited Power in favor of a charity,

then she had no other options. Their logic overlooks the fact that Alice included the

Adopted Children Proviso in the 1976 Exercise, the 1983 Exercise and the 1986 Exercise

for Phyllis’s benefit. If Phyllis adopted children, then she could exercise the Second

Limited Power in favor of her adopted children. The disposition framework in the 1986

Exercise thus created a path for Phyllis to exercise the Second Limited Power, even if she

could not rely on the Second Charitable Proviso.

In their fourth argument, the Foundation and the Executor assert that Alice plainly

wanted Phyllis to be able give the Phyllis Trust to charity, and so if Alice had thought that

Phyllis might not be able to rely on the Second Charitable Proviso, then she would have

followed another donative course, such as giving Phyllis her share outright. In the face of

the plain language of the 1986 Exercise, that kind of speculation cannot carry the day. Alice

had a range of donative options available to her. She could have given Phyllis her share of

Trust No. 2108 outright, as she did in the 1976 Exercise through the Direct Distribution

Provision. That course of action would have carried with it various advantages and

disadvantages, including tax implications. Instead, Alice chose to appoint Phyllis’s share

of Trust No. 2108 to her in trust, while giving Phyllis the benefit of the Second Limited

Power. That course of action carried a different set of advantages and disadvantages. The

court must analyze the validity of Alice’s actions based on the course she formally took,

not paths she might have taken. Cf. Orzeck v. Englehart, 195 A.2d 375, 377 (Del.1963)

(discussing doctrine of independent legal significance). See generally C. Stephen Bigler &

27 Blake Rohrbacher, Form or Substance? The Past, Present, and Future of the Doctrine of

Independent Legal Significance, 63 Bus. Law. 1 (2007).

Finally, the Foundation and the Executor claim that reading the plain language of

the Second Charitable Proviso is non-sensical because it would require the court to assume

that Alice anticipated the adoption of the Appointee Expansion Statute. To make that

notion seem all the more extreme, the Foundation and the Executor stress that the General

Assembly first enacted Section 505 in 2003, a year after Alice died, and did not enact the

Appointee Expansion Statute until 2019, thirty-three years after Alice executed the 1986

Exercise. But that argument is itself extreme. Alice did not have to anticipate the passage

of a specific statute in a specific year. She and her lawyers merely had to recognize that a

longstanding common law rule prohibited the holder of a limited power of appointment

from expanding the universe of permissible appointees, and they simply had to contemplate

the possibility that at some unknown point in the future, the law might change. They did

not have to predict when the change might arrive, nor whether it would permit the addition

of appointees broadly or only the possibility of charitable appointees, nor whether it might

come via statute, court decision, regulation, or otherwise. They only had to recognize that

if Phyllis executed an instrument that relied on the Second Charitable Proviso, then there

were two states of the world that might exist: Either Phyllis would rely on the Second

Charitable Proviso at a time when adding a charity as an appointee was permissible, or she

28 would rely on it at a time when it was impermissible. The 1986 Exercise sensibly addressed

both alternatives.8

2. The Final Default Provision In The 1986 Exercise Controls.

Because the 1986 Exercise is valid, the Final Default Provision in that instrument

controls, The Phyllis Trust vests in Alice’s “then surviving issue, per stirpes,” with “then

surviving issue” measured at the time of Phyllis’s death. The Phyllis Trust therefore goes

to James and Mary.

The Executor argues for a different result under the Foulke decision. There, a father

(Ashton9) granted his daughter (Mabel) a power of appointment over a testamentary trust.

Mabel exercised the power to create a further trust for the benefit of her five children and

their issue, per stirpes. A dispute arose because the power of appointment only permitted

Mable to exercise it in favor of her children, not their issue. Mabel’s attempt to exercise

the limited power in favor of her children’s issue thus purported to add additional

8 Relatedly, the Executor argues that to infer that Phyllis anticipated the passage of the 2019 Amendment contravenes Delaware law. Wyeth Reply Br. at 7. He relies on Section 3330(a) of the Trust Act, which states: “There shall be no presumption that a testator or trustor did or did not intend that any law apply to a governing instrument which was not in effect on the date of execution of such governing instrument.” 12 Del. C. § 3330(a)(1). He contends that as a matter of law, the court cannot interpret the 1986 Exercise as anticipating the Appointee Expansion Statute. For one thing, this decision has not interpreted the 1986 Exercise as anticipating the Appointee Expansion Statute. The 1986 Exercise merely anticipated the two possible states of the world that could exist if Phyllis exercised an instrument that relied on the Second Charitable Proviso. For another, Section 3330(a) only addresses the possibility of a presumption. It does not say anything about interpreting the plain language of an instrument. 9 The father’s name was James Ashton Bayard. To avoid introducing another James, this decision refers to him as Ashton.

29 appointees, which she could not do. Nevertheless, when Mable died, two of her children

(Jean and Elizabeth) remained living. The exercise of the power was therefore valid as to

them, even if invalid as to the issue of her other children. Foulke, 40 A.2d at 715–17.

The court considered how to distribute the property held in trust. The court noted

that “[u]nder the old general rule, when the donee of a power of appointment includes

persons who are not objects of the donor’s bounty, the excess appointment is alone

invalid.” Id. at 717. If the court applied the “old general rule,” then Mable’s exercise would

be treated as valid as to Jean and Elizabeth, and they each would receive a one-fifth share

of the trust under the exercise. Id. The remaining three-fifths of the property would pass

under Ashton’s will to Mabel’s children and their issue, per stirpes, resulting in Jean and

Elizabeth receiving another one-fifth share of the property that Mabel had not validly

appointed. Under that distribution scheme, Jean and Elizabeth would each receive 32% of

the trust property. Yet Mable’s scheme and Ashton’s scheme both demonstrated an intent

for each child, and their issue, to receive an equal 20% share of the property.

Mabel’s grandchildren (the issue of her deceased children) viewed this result as

inequitable and asked the court to treat Mabel’s entire exercise of the power as invalid. Id.

The court noted that more recent authorities called for considering whether the donative

scheme of the original grantor would be better served by holding the instrument entirely

invalid and allowing the property to pass in default of appointment. Id. at 718. After

examining Ashton’s will, the court concluded that Ashton had demonstrated an intent for

each child and their issue to receive an equal share of the property. That distribution could

30 be achieved by holding Mabel’s exercise wholly invalid, so the court reached that result.

Id. at 719.

The Executor argues that the same equitable principles should govern here. The

Executor correctly observes that if the 2006 Exercise fails, and if the Phyllis Trust goes to

James and Mary under the 1986 Exercise, then James and Mary each will receive half of

the property originally in Trust No. 2108. Under the Trust Agreement, however, the

Original Default Provision contemplated that if Alice did not exercise the Original Limited

Power, then when she died, the property in Trust No. 2108 would descend to Alice’s “then

living issue, if any, per stirpes and not per capita.” Pet. Ex. A § 1. The Executor argues that

the Trust Agreement evidences an intent for each of Alice’s children who were alive at her

death to receive an equal share. The Executor also argues that in each of her four exercises,

Alice sought to give each of her children the benefit of an equal share. When Alice died,

Phyllis, James, and Mary were her then-living issue, so if Alice failed to exercise the

Original Limited Power, then the Original Default Provision would have resulted in each

child receiving one-third of the property held in Trust No. 2108. The Estate argues that the

court should impose that result in this case by holding the 1986 Exercise is wholly invalid

and directing the Trustee to transfer the Phyllis Trust to the Executor, free from trust.

The impediment to the Executor’s argument is that unlike in Foulke, Alice explicitly

addressed the possibility that a child might attempt to exercise the Second Limited Power,

but do so impartially or ineffectively. Alice included the Final Default Provision in the

1986 Exercise, which states what should happen if that came to pass. In Foulke, the

instrument did not address what would happen if the limited power was exercised in a

31 manner that was partially invalid, and so the court was left without guidance. Lacking

explicit direction from Mabel as to what should occur in that circumstance, the Foulke

court applied equitable principles. In this case, the 1986 Exercise addresses that issue

directly. With Alice having exercised her authority, there is no room for the court to rely

on equitable discretion. The court’s task instead is to implement Alice’s intent as expressed

in the plain language of the 1986 Exercise.

The Final Default Provision governs this case. The property held in trust goes to

James and Mary.

C. Laches

The Foundation and the Executor contend that James cannot challenge the 2006

Exercise now because he ostensibly should have filed a lawsuit challenging the Second

Charitable Proviso years ago. The Foundation and the Executor invoke laches,

acquiescence, waiver, equitable estoppel, and unclean hands, each based on the same

underlying theory. Parsing each defense is unnecessary. The contention that a party delayed

bringing a claim for an inequitably long time falls squarely within the domain of laches, so

this decision analyzes that doctrine. The facts alleged, however, are too meager to support

a reasonable inference that James waited too long to sue.

“A finding of laches generally requires the presence of three factors: claimant’s

knowledge of the claim, unreasonable delay in bringing the claim, and resulting prejudice

to the defendant.” Kraft v. Wisdom Tree Ins., Inc., 145 A.3d 969, 974 (Del. Ch. 2016). The

contention that James knew about the potential invalidity of the Second Charitable Proviso

is speculative at best. So too is the contention that he knew Phyllis had relied on it. The

32 Foundation and the Executor allege only that because James was a beneficiary of the 1986

Exercise, he should have identified the Second Charitable Power and disputed its validity

in case Phyllis might someday rely on it at a time when Delaware law did not permit it.

In support of its laches defense, the Executor relies on a single, inapposite authority:

In re Tr. F/B/O Dorothy J. D’Amato Under Agreement of George G. D’Amato Dated

February 19, 2014, As Amended, C.A. No. 2020-0087-JTL (Aug. 3, 2020). The D’Amato

case involved a unique and complex dispute. The deceased settlor, George D. D’Amato,

used his will to create a series of trusts. His donative plan contemplated that after the death

of his widow and any of his issue, the trusts would distribute their property to a foundation

named the “George D. D’Amato Family Foundation” (the “Planned Foundation”). The

settlor died without creating the Planned Foundation. After his death, his son created a

foundation with that name, but with a purpose contrary to what the settlor contemplated

(the “Alternative Foundation”).

The trustee for the settlor’s widow sought a declaration that the Alternative

Foundation was not a valid remainder beneficiary under the settlor’s will. In litigation

involving the same trusts that was pending in New York, the Alternative Foundation had

intervened on the grounds that it was a valid remainder beneficiary. In response to the

Delaware petition, however, the Alternative Foundation argued that the dispute over its

status as a remainder beneficiary was not ripe, because the trustee’s power to invade trust

principal for the widow’s benefit could result in nothing being left for the Alternative

Foundation to receive.

33 The court held that the dispute was ripe, applying the principle that when assessing

ripeness, the court makes “‘a practical evaluation of the legitimate interest of the plaintiff

in a prompt resolution of the question presented and the hardship that further delay may

threaten.’” Id. ¶ 3(d) (quoting Schick Inc. v. Amalgamated Clothing & Textile Workers

Union, 533 A.2d 1235, 1238 (Del. Ch. 1987)). The court noted that the dispute over the

status of the Alternative Foundation was sufficiently concrete to address, because the

Alternative Foundation had asserted its status as a remainder beneficiary on multiple

occasions, including in the litigation pending in New York. Id. ¶ 3(e). In addition, because

the Alternative Foundation’s status turned on the settlor’s will, the facts necessary to

adjudicate the dispute were fully developed. The court also observed that the trustee

“deserve[s] to know the status of the Foundation as a remainder beneficiary when making

decisions regarding the Trusts.” Id. ¶ 3(f).

Notably, the question in D’Amato involved ripeness, not laches. The court held that

the trustee of the widow’s trust could litigate whether the Alternative Foundation was a

remainder beneficiary. The court did not suggest that the trustee would have been barred

from litigating the issue under the doctrine of laches if the trustee had waited to file suit

later. The D’Amato order does not suggest that the trustee’s claim would have been

foreclosed if the trustee had chosen instead to wait until the widow had died. The D’Amato

ruling is thus legally inapposite. The ruling is also factually distinguishable. It involved a

party taking conflicting positions, with the Alternative Foundation claiming that the dispute

over its status as a remainder beneficiary was not ripe while simultaneously relying on that

status in litigation in New York. The D’Amato case also involved a situation where facts

34 concerning the Alternative Foundation’s status as a remainder beneficiary could not change

and where the possibility was remote that the trustee would deplete the trusts and avoid the

need for a decision.

In contrast to D’Amato, neither Alice nor Phyllis ever confronted James with a claim

that the Second Charitable Proviso or the 2006 Exercise were valid. Accepting that James

learned about the Second Charitable Proviso when Alice died in 2002, there was no reason

for him to file suit at that time. James has never contended the that the 1986 Exercise was

invalid, so he did not have any reason to challenge the validity of that instrument. He also

did not have cause to target the Second Charitable Proviso. As this decision has explained,

Phyllis did not need to rely on that provision. She could have adopted children and

exercised the Second Limited Power without reference to the Second Charitable Proviso,

or she could have chosen not to exercise the Second Limited Power at all. It was also

possible, as demonstrated by the later adoption of the Appointee Expansion Statute, that

the law could change such that Phyllis would be able to rely on the Second Charitable

Proviso.

The Foundation and the Executor allege in wholly conclusory fashion that James

knew or should have known that Phyllis executed the 2006 Exercise in reliance on the

Second Charitable Proviso, at which point they say he should have filed suit. The party

asserting an affirmative defense must support the defense with pled facts. Roma Landmark

Theaters, LLC v. Cohen Exhibition Co. LLC, 2021 WL 2182828, at *1, *5 (Del. Ch. May

28, 2021) (collecting authorities). Knowledge can be pled generally, but there still must be

some factual content to support a reasonable inference of knowledge. The Foundation and

35 the Executor provided nothing to support their conclusory allegation. It also remains true

that even if James suspected that Phyllis had relied on the Second Charitable Proviso, she

could have changed her dispositive scheme at any point up to her death, or the law could

have changed to make her reliance on the Second Charitable Proviso permissible.

James raised his concerns promptly after Phyllis’s death. The Trustee responded by

filing this suit. It is not reasonably conceivable that James could be denied relief based on

the defense of laches. That is particularly so when the central issue involves the validity of

an instrument where the outcome turns on the plain language of the Trust Agreement and

longstanding principles of law. To rely on laches to bar James’ claim would permit Phyllis

to contravene the settlor’s intent.

D. The Claim of Breach of Fiduciary Duty.

The Executor claims that the Trustee breached its fiduciary duty as a trustee by

failing to raise any issue about the potential invalidity of the 1986 Exercise or the 2006

Exercise. Whether the Executor has a claim against the Trustee does not affect the validity

of either exercise or the court’s ability to grant judgment on the pleadings on the issue of

their validity. This decision does not express any view on the issue of a breach of fiduciary

duty, except to observe that it does not affect the questions addressed in this opinion.

III. CONCLUSION

The 1986 Exercise was effective. The 2006 Exercise, however, was ineffective

because Phyllis sought to appoint the Phyllis Trust to an appointee that Felix had not

contemplated within the scope of the Original Limited Power. The Final Default Provision

in the 1986 Exercise controls the disposition of the Phyllis Trust. The Trustee will distribute

36 the Phyllis Trust outright to James and Mary. The parties will submit an implementing

order that has been agreed upon as to form.