Hanson v. DencklaAnnotate this Case
357 U.S. 235 (1958)
U.S. Supreme Court
Hanson v. Denckla, 357 U.S. 235 (1958)
Hanson v. Denckla
Argued March 10-11, 1958
Decided June 23, 1958
357 U.S. 235
APPEAL FROM THE SUPREME COURT OF FLORIDA
While domiciled in Pennsylvania, a woman executed in Delaware a revocable deed of trust making a Delaware trust company trustee of certain securities, reserving the income for life and providing that the remainder should be paid to such parties as she should appoint by inter vivos or testamentary instrument. Later, after becoming domiciled in Florida, where she remained until her death, she executed (1) an inter vivos instrument appointing certain beneficiaries to receive $400,000 of the trust property, and (2) a will containing a residuary clause covering, inter alia,
"all property, rights and interest over which I may have power of appointment which, prior to my death, has not been effectively exercised."
In a proceeding in which the Delaware trust company did not appear and was given notice only by mail and publication, a Florida State Court held that the trust and power of appointment were ineffective under Florida law, and that the $400,000 passed under the residuary clause of the will. This ruling was sustained by the Supreme Court of Florida, which also held that the Florida court had jurisdiction over the nonresident trust company, and an appeal was taken to this Court. A Delaware court with personal jurisdiction over the trust company sustained the trust and inter vivos appointment and held that the parties designated therein were entitled to the $400,000. This decision was sustained by the Supreme Court of Delaware, and its judgment was brought here on certiorari. Both Delaware courts denied motions to give full faith and credit to the Florida decree.
1. This Court need not determine whether Florida was bound to give full faith and credit to the Delaware decree, because that question was not seasonably presented to the Florida court. Pp. 357 U. S. 243-244.
2. This Court is without jurisdiction of the Florida appeal, and it is dismissed; but, treating the papers whereon appeal was taken
as a petition for certiorari, 28 U.S.C § 2103, certiorari is granted. P. 357 U. S. 244.
3. Appellants in the Florida case have standing to challenge the jurisdiction of the Florida court over the nonresident trust company which made no appearance, because they have a "direct and substantial personal interest in the outcome" of the litigation, Chicago v. Atchison, T. & S.F. R. Co., ante, p. 357 U. S. 77, and the trustee was an indispensable party without whom a Florida court had no power to adjudicate the controversy. Pp. 357 U. S. 244-245.
4. The Florida court did not have in rem jurisdiction over the corpus of the trust or personal jurisdiction over the trust company. Without such jurisdiction, it had no power under Florida law to pass on the validity of the trust. Therefore, its decree is void under the Due Process Clause of the Fourteenth Amendment, and it is reversed, not only as to the trust company, but also as to the individuals over whom it did have jurisdiction. Pp. 357 U. S. 245-254.
(a) Though the property involved was intangible personal property, the settlor was domiciled in Florida at the time of her death, and Florida had jurisdiction over the probate and construction of her will, it had no in rem jurisdiction over the trust assets, and its judgment is invalid insofar as it rests on the basis of in rem jurisdiction. Pp. 357 U. S. 246-250.
(b) The trust company did not have sufficient affiliation with Florida to empower the Florida courts to exercise personal jurisdiction over it. McGee v. International Life Ins. Co.,355 U. S. 220, distinguished. Pp. 357 U. S. 250-253.
(c) Since it is the validity of the trust agreement, not the exercise of the power of appointment, that is at issue here, the execution in Florida of the power of appointment does not give Florida a substantial connection with the contract on which the suit is based, nor justify the exercise of personal jurisdiction over the nonresident trustee. Pp. 357 U. S. 253-254.
(d) That the settlor and most of the appointees and beneficiaries were domiciled in Florida does not give Florida personal jurisdiction over this nonresident trustee. P. 357 U. S. 254.
(e) Because the Florida Supreme Court has repeatedly held that a trustee is an indispensable party without whom a Florida court has no power to adjudicate controversies affecting the validity of a trust (though it did not rule on that point in this case), the
Florida judgment must be reversed not only as to the nonresident trustees, but also as to the appellant over whom the Florida court admittedly had jurisdiction. Pp. 357 U. S. 254-255.
5. Delaware was under no obligation to give full faith and credit to the invalid Florida judgment, and the Delaware judgment is affirmed. Pp. 357 U. S. 255-256.
(a) Since Delaware was entitled to conclude that Florida law made the trust company an indispensable party, it was under no obligation to give the Florida judgment any faith and credit -- even against parties over whom Florida's jurisdiction was unquestioned. P. 357 U. S. 255.
(b) The Delaware case should not be held while the Florida case is remanded to give the Florida court an opportunity to determine whether the trustee is an indispensable party in the circumstance of this case, since there is ample Florida authority from which the answer to that question may be determined. Pp. 357 U. S. 255-256.
100 So.2d 378 reversed, and cause remanded. ___Del. ___, 128 A. 2d 819, affirmed.
MR. CHIEF JUSTICE WARREN delivered the opinion of the Court.
This controversy concerns the right to $400,000, part of the corpus of a trust established in Delaware by a settlor who later became domiciled in Florida. One group of claimants, "legatees," urge that this property passed under the residuary clause of the settlor's will, which was admitted to probate in Florida. The Florida courts have sustained this position. 100 So.2d 378. Other claimants, "appointees" and "beneficiaries," contend that the property passed pursuant to the settlor's exercise of the inter vivos power of appointment created in the deed of trust. The Delaware courts adopted this position and refused to accord full faith and credit to the Florida determination because the Florida court had not acquired jurisdiction over an indispensable party, the Delaware trustee. ___ Del. ___, 128 A.2d 819. We postponed the question of jurisdiction in the Florida appeal, No. 107, 354 U.S. 919, and granted certiorari to the Delaware Supreme Court, No. 117, 354 U.S. 920.
The trust whose validity is contested here was created in 1935. Dora Browning Donner, then a domiciliary of Pennsylvania, executed a trust instrument in Delaware naming the Wilmington Trust Co., of Wilmington, Delaware, as trustee. The corpus was composed of securities. Mrs. Donner reserved the income for life, and stated that the remainder should be paid to such persons or upon such trusts as she should appoint by inter vivos or testamentary instrument. The trust agreement provided that Mrs. Donner could change the trustee, and that she could amend, alter, or revoke the agreement at any time. A measure of control over trust administration was assured by the provision that only with the consent of a trust "advisor" appointed by the settlor could the trustee (1) sell trust assets, (2) make investments, and (3) participate in any plan, proceeding, reorganization or merger
involving securities held in the trust. A few days after the trust was established, Mrs. Donner exercised her power of appointment. That appointment was replaced by another in 1939. Thereafter, she left Pennsylvania, and, in 1944, became domiciled in Florida, where she remained until her death in 1952. Mrs. Donner's will was executed Dec. 3, 1949. On that same day, she executed the inter vivos power of appointment whose terms are at issue here. [Footnote 1] After making modest appointments in favor of a hospital and certain family retainers (the "appointees"), [Footnote 2] she appointed the sum of $200,000 to each of two trusts previously established with another Delaware trustee, the Delaware Trust Co. The balance of the trust corpus, over $1,000,000 at the date of her death, was appointed to her executrix. That amount passed under the residuary clause of her will, and is not at issue here.
The two trusts with the Delaware Trust Co. were created in 1948 by Mrs. Donner's daughter, Elizabeth Donner Hanson, for the benefit of Elizabeth's children, Donner Hanson and Joseph Donner Winsor. In identical terms, they provide that the income not required for the beneficiary's support should be accumulated to age 25, when the beneficiary should be paid 1/4 of the corpus and receive the income from the balance for life. Upon the death of the beneficiary, the remainder was to go to such of the beneficiary's issue or Elizabeth Donner Hanson's issue as the beneficiary should appoint by inter vivos or testamentary instrument; in default of appointment, to the beneficiary's issue alive at the time of his death, and if none to the issue of Elizabeth Donner Hanson.
Mrs. Donner died Nov. 20, 1952. Her will, which was admitted to probate in Florida, named Elizabeth Donner
Hanson as executrix. She was instructed to pay all debts and taxes, including any which might be payable by reason of the property appointed under the power of appointment in the trust agreement with the Wilmington Trust Co. After disposing of personal and household effects, Mrs. Donner's will directed that the balance of her property (the $1,000,000 appointed from the Delaware trust) be paid in equal parts to two trusts for the benefit of her daughters Katherine N. R. Denckla and Dorothy B. R. Stewart.
This controversy grows out of the residuary clause that created the last-mentioned trusts. It begins:
"All the rest, residue and remainder of my estate, real, personal and mixed, whatsoever and wheresoever the same may be at the time of my death, including any and all property, rights, and interest over which I may have power of appointment which prior to my death has not been effectively exercised by me or has been exercised by me in favor of my Executrix, I direct my Executrix to deal with as follows . . . ."
Residuary legatees Denckla and Stewart, already the recipients of over $500,000 each, urge that the power of appointment over the $400,000 appointed to sister Elizabeth's children was not "effectively exercised," and that the property should accordingly pass to them. Fourteen months after Mrs. Donner's death, these parties petitioned a Florida chancery court for a declaratory judgment "concerning what property passes under the residuary clause" of the will. Personal service was had upon the following defendants: (1) executrix Elizabeth Donner Hanson, (2) beneficiaries Donner Hanson and Joseph Donner Winsor, and (3) potential beneficiary William Donner Roosevelt, also one of Elizabeth's children. Curtin Winsor, Jr., another of Elizabeth's children and
also a potential beneficiary of the Delaware trusts, was not named as a party, and was not served. About a dozen other defendants were nonresidents, and could not be personally served. These included the Wilmington Trust Co. ("trustee"), the Delaware Trust Co. (to whom the $400,000 had been paid shortly after Mrs. Donner's death), certain individuals who were potential successors in interest to complainants Denckla and Stewart, and most of the named appointees in Mrs. Donner's 1949 appointment. A copy of the pleadings and a "Notice to Appear and Defend" were sent to each of these defendants by ordinary mail, and notice was published locally as required by the Florida statutes dealing with constructive service. [Footnote 3] With the exception of two individuals whose interests coincided with complainants Denckla and Stewart, none of the nonresident defendants made any appearance.
The appearing defendants (Elizabeth Donner Hanson and her children) moved to dismiss the suit because the exercise of jurisdiction over indispensable parties, the Delaware trustees, would offend Section 1 of the
Fourteenth Amendment. The Chancellor ruled that he lacked jurisdiction over these nonresident defendants because no personal service was had and because the trust corpus was outside the territorial jurisdiction of the court. The cause was dismissed as to them. As far as parties before the court were concerned, however, he ruled that the power of appointment was testamentary and void under the applicable Florida law. In a decree dated Jan. 14, 1955, he ruled that the $400,000 passed under the residuary clause of the will.
After the Florida litigation began, but before entry of the decree, the executrix instituted a declaratory judgment action in Delaware to determine who was entitled to participate in the trust assets held in that State. Except for the addition of beneficiary Winsor and several appointees, the parties were substantially the same as in the Florida litigation. Nonresident defendants were notified by registered mail. All of the trust companies, beneficiaries, and legatees except Katherine N. R. Denckla, appeared and participated in the litigation. After the Florida court enjoined executrix Hanson from further participation, her children pursued their own interests. When the Florida decree was entered, the legatees unsuccessfully urged it as res judicata of the Delaware dispute. In a decree dated Jan. 13, 1956, the Delaware Chancellor ruled that the trust and power of appointment were valid under the applicable Delaware law, and that the trust corpus had properly been paid to the Delaware Trust Co. and the other appointees. Hanson v. Wilmington Trust Co., 119 A.2d 901.
Alleging that she would be bound by the Delaware decree, the executrix moved the Florida Supreme Court to remand with instructions to dismiss the Florida suit then pending on appeal. No full faith and credit question was raised. The motion was denied. The Florida Supreme Court affirmed its Chancellor's conclusion that Florida law applied to determine the validity of the trust
and power of appointment. Under that law, the trust was invalid because the settlor had reserved too much power over the trustee and trust corpus, and the power of appointment was not independently effective to pass the property because it was a testamentary act not accompanied by the requisite formalities. The Chancellor's conclusion that there was no jurisdiction over the trust companies and other absent defendants was reversed. The court ruled that jurisdiction to construe the will carried with it "substantive" jurisdiction "over the persons of the absent defendants" even though the trust assets were not "physically in this state." Whether this meant jurisdiction over the person of the defendants or jurisdiction over the trust assets is open to doubt. In a motion for rehearing, the beneficiaries and appointees urged for the first time that Florida should have given full faith and credit to the decision of the Delaware Chancellor. The motion was denied without opinion, Nov. 28, 1956.
The full faith and credit question was first raised in the Delaware litigation by an unsuccessful motion for new trial filed with the Chancellor Jan. 20, 1956. After the Florida Supreme Court decision, the matter was renewed by a motion to remand filed with the Delaware Supreme Court. In a decision of Jan. 14, 1957, that court denied the motion and affirmed its Chancellor in all respects. The Florida decree was held not binding for purposes of full faith and credit because the Florida court had no personal jurisdiction over the trust companies and no jurisdiction over the trust res.
The issues for our decision are, first, whether Florida erred in holding that it had jurisdiction over the nonresident defendants, and second, whether Delaware erred in refusing full faith and credit to the Florida decree. We need not determine whether Florida was bound to give full faith and credit to the decree of the Delaware Chancellor,
No. 107, The Florida Appeal. The question of our jurisdiction was postponed until the hearing of the merits. The appeal is predicated upon the contention that, as applied to the facts of this case, the Florida statute providing for constructive service is contrary to the Federal Constitution. 28 U.S.C. § 1257(2). But, in the state court, appellants (the "beneficiaries") did not object that the statute was invalid as applied, but rather that the effect of the state court's exercise of jurisdiction in the circumstances of this case deprived them of a right under the Federal Constitution. [Footnote 4] Accordingly, we are without jurisdiction of the appeal, and it must be dismissed. Wilson v. Cook,327 U. S. 474, 327 U. S. 482; Charleston Fed. Sav. & Loan Ass'n v. Alderson,324 U. S. 182. Treating the papers whereon appeal was taken as a petition for certiorari, 28 U.S.C. § 2103, certiorari is granted.
Relying upon the principle that a person cannot invoke the jurisdiction of this Court to vindicate the right of a third party, [Footnote 5] appellees urge that appellants lack standing to complain of a defect in jurisdiction over the nonresident
trust companies, who have made no appearance in this action. Florida adheres to the general rule that a trustee is an indispensable party to litigation involving the validity of the trust. [Footnote 6] In the absence of such a party, a Florida court may not proceed to adjudicate the controversy. [Footnote 7] Since state law required the acquisition of jurisdiction over the nonresident trust company [Footnote 8] before the court was empowered to proceed with the action, any defendant affected by the court's judgment has that "direct and substantial personal interest in the outcome" that is necessary to challenge whether that jurisdiction was in fact acquired. Chicago v. Atchison, T. & S.F. R. Co.,357 U. S. 77.
Appellants charge that this judgment is offensive to the Due Process Clause of the Fourteenth Amendment because the Florida court was without jurisdiction. There is no suggestion that the court failed to employ a means of notice reasonably calculated to inform nonresident defendants of the pending proceedings, [Footnote 9] or denied them an opportunity to be heard in defense of their interests. [Footnote 10] The alleged defect is the absence of those
"affiliating circumstances" [Footnote 11] without which the courts of a state may not enter a judgment imposing obligations on persons (jurisdiction in personam) or affecting interests in property (jurisdiction in rem or quasi in rem). [Footnote 12] While the in rem and in personam classifications do not exhaust all the situations that give rise to jurisdiction, [Footnote 13] they are adequate to describe the affiliating circumstances suggested here, and accordingly serve as a useful means of approach to this case.
In rem jurisdiction. Founded on physical power, McDonald v. Mabee,243 U. S. 90, 243 U. S. 91, the in rem jurisdiction of a state court is limited by the extent of its power and by the coordinate authority of sister States. [Footnote 14] The basis of the jurisdiction is the presence of the subject property within the territorial jurisdiction of the forum State. Rose v. Himely, 4 Cranch 241, 8 U. S. 277; Overby v. Gordon,177 U. S. 214, 177 U. S. 221-222. Tangible property poses no problem for the application of this rule, but the situs of
intangibles is often a matter of controversy. [Footnote 15] In considering restrictions on the power to tax, this Court has concluded that "jurisdiction" over intangible property is not limited to a single State. State Tax Commission of Utah v. Aldrich,316 U. S. 174; Curry v. McCanless,307 U. S. 357. Whether the type of "jurisdiction" with which this opinion deals may be exercised by more than one State we need not decide. The parties seem to assume that the trust assets that form the subject matter of this action [Footnote 16] were located in Delaware, and not in Florida. We can see nothing in the record contrary to that assumption, or sufficient to establish a situs in Florida. [Footnote 17]
The Florida court held that the presence of the subject property was not essential to its jurisdiction. Authority over the probate and construction of its domiciliary's will, under which the assets might pass, was thought sufficient
to confer the requisite jurisdiction. [Footnote 18] But jurisdiction cannot be predicated upon the contingent role of this Florida will. Whatever the efficacy of a so-called "in rem" jurisdiction over assets admittedly passing under a local will, a State acquires no in rem jurisdiction to adjudicate the validity of inter vivos dispositions simply because its decision might augment an estate passing under a will probated in its courts. If such a basis of jurisdiction were sustained, probate courts would enjoy nationwide service of process to adjudicate interests in property with which
neither the State nor the decedent could claim any affiliation. The settlor-decedent's Florida domicile is equally unavailing as a basis for jurisdiction over the trust assets. For the purpose of jurisdiction in rem, the maxim that personalty has its situs at the domicile of its owner [Footnote 19] is a fiction of limited utility. Green v. Van Buskirk, 7 Wall. 139, 74 U. S. 150. The maxim is no less suspect when the domicile is that of a decedent. In analogous cases, this Court has rejected the suggestion that the probate decree of the State where decedent was domiciled has an in rem effect on personalty outside the forum State that could render it conclusive on the interests of nonresidents over whom there was no personal jurisdiction. Riley v. New York Trust Co.,315 U. S. 343, 315 U. S. 353; Baker v. Baker, Eccles & Co.,242 U. S. 394, 242 U. S. 401; Overby v. Gordon,177 U. S. 214. [Footnote 20] The fact that the owner is or was domiciled within the forum State is not a sufficient affiliation with the property upon which to base jurisdiction in rem. Having concluded that Florida had no in rem jurisdiction, we proceed to consider whether a judgment purporting to rest on that basis is invalid in Florida, and must therefore be reversed.
Prior to the Fourteenth Amendment, an exercise of jurisdiction over persons or property outside the forum State was thought to be an absolute nullity, [Footnote 21] but the matter
remained a question of state law over which this Court exercised no authority. [Footnote 22] With the adoption of that Amendment, any judgment purporting to bind the person of a defendant over whom the court had not acquired in personam jurisdiction was void within the State as well as without. Pennoyer v. Neff,95 U. S. 714. Nearly a century has passed without this Court's being called upon to apply that principle to an in rem judgment dealing with property outside the forum State. The invalidity of such a judgment within the forum State seems to have been assumed -- and with good reason. Since a State is forbidden to enter a judgment attempting to bind a person over whom it has no jurisdiction, it has even less right to enter a judgment purporting to extinguish the interest of such a person in property over which the court has no jurisdiction. [Footnote 23] Therefore, so far as it purports to rest upon jurisdiction over the trust assets, the judgment of the Florida court cannot be sustained. Sadler v. Industrial Trust Co., 327 Mass. 10, 97 N.E.2d 169.
In personam jurisdiction. Appellees' stronger argument is for in personam jurisdiction over the Delaware trustee. They urge that the circumstances of this case amount to sufficient affiliation with the State of Florida to empower its courts to exercise personal jurisdiction over this nonresident defendant. Principal reliance is placed upon McGee v. International Life Ins. Co.,355 U. S. 220. In McGee, the Court noted the trend of expanding personal jurisdiction over nonresidents. As technological
progress has increased the flow of commerce between States, the need for jurisdiction over nonresidents has undergone a similar increase. At the same time, progress in communications and transportation has made the defense of a suit in a foreign tribunal less burdensome. In response to these changes, the requirements for personal jurisdiction over nonresidents have evolved from the rigid rule of Pennoyer v. Neff,95 U. S. 714, to the flexible standard of International Shoe Co. v. Washington,326 U. S. 310. But it is a mistake to assume that this trend heralds the eventual demise of all restrictions on the personal jurisdiction of state courts. See Vanderbilt v. Vanderbilt,354 U. S. 416, 354 U. S. 418. Those restrictions are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States. However minimal the burden of defending in a foreign tribunal, a defendant may not be called upon to do so unless he has had the "minimal contacts" with that State that are a prerequisite to its exercise of power over him. See International Shoe Co. v. Washington,326 U. S. 310, 326 U. S. 319.
We fail to find such contacts in the circumstances of this case. The defendant trust company has no office in Florida, and transacts no business there. None of the trust assets has ever been held or administered in Florida, and the record discloses no solicitation of business in that State, either in person or by mail. Cf. International Shoe Co. v. Washington,326 U. S. 310; McGee v. International Life Ins. Co.,355 U. S. 220; Travelers Health Ass'n v. Virginia,339 U. S. 643.
The cause of action in this case is not one that arises out of an act done or transaction consummated in the forum State. In that respect, it differs from McGee v. International Life Ins. Co.,355 U. S. 220, and the cases there cited. In McGee, the nonresident defendant solicited a reinsurance agreement with a resident of California.
The offer was accepted in that State, and the insurance premiums were mailed from there until the insured's death. Noting the interest California has in providing effective redress for its residents when nonresident insurers refuse to pay claims on insurance they have solicited in that State, the Court upheld jurisdiction because the suit "was based on a contract which had substantial connection with that State." In contrast, this action involves the validity of an agreement that was entered without any connection with the forum State. The agreement was executed in Delaware by a trust company incorporated in that State and a settlor domiciled in Pennsylvania. The first relationship Florida had to the agreement was years later, when the settlor became domiciled there and the trustee remitted the trust income to her in that State. From Florida, Mrs. Donner carried on several bits of trust administration that may be compared to the mailing of premiums in McGee. [Footnote 24] But the record discloses no instance in which the trustee performed any acts in Florida that bear the same relationship to the agreement as the solicitation in McGee. Consequently, this suit cannot be said to be one to enforce an obligation that arose from a privilege the defendant exercised in Florida. Cf. International Shoe Co. v. Washington,326 U. S. 310, 326 U. S. 319. This case is also different from McGee in that, there, the State had enacted special legislation (Unauthorized Insurers Process Act) to exercise what McGee called its "manifest interest" in providing effective redress for citizens who had been injured by nonresidents engaged in an activity that the State treats as exceptional and subjects to special regulation. Cf. 339 U. S. S. 253
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