Delaware Supreme Court Affirms Court of Chancery’s Protection of Delaware Spendthrift Trust

Delaware Fiduciary Litigation Blog

Posted May 22, 2017

Mennen, et al. v. Fiduciary Trust International of Delaware, et al. (May 17, 2017)

     In a nationally significant one-page order, the Delaware Supreme Court affirmed the Court of Chancery’s February 27, 2017 order which order was based on the “well-reasoned” April 24, 2015 Master’s Final Report. The Supreme Court order is attached below. The Supreme Court panel consisted of C.J. Strine, J. Vaughn and J. Seitz.

     On this blog, we previously wrote about the Court of Chancery decisions in this case relating to the spendthrift clause issue. See and (attached at this blog entry is the entire April 24, 2015 Master’s Final Report) and

     In this case, the beneficiaries of a trust sought the removal of the co-trustees and also damages in excess of $100 million as a result of alleged breaches of the co-trustees’ fiduciary duties. The defendant trustees included an individual who has a separate trust created for his benefit. The plaintiffs succeeded in their effort to get a judgment against the individual trustee and we wrote about that decision on this blog at The judgment was for approximately $100 million. To collect on that judgment, the plaintiffs sought to pierce the individual trustee’s separate trust, but that trust has a spendthrift clause.

     In her report, the Master noted that, “[a]lthough the policy arguments against enforcement of spendthrift clauses are interesting and compelling, the passage of Section 3536 made clear that this Court must enforce such clauses, subject only to the limits contained or permitted in the statute.” The Master also concluded that if Plaintiffs were successful at trial, they would merely become creditors of the individual trustee within the meaning of [12 Del. Code] Section 3536. The Plaintiffs argued that as tort claimants and family members they should be entitled to pierce the trust. But the Master rejected that argument and found that there is ample precedent that tort claimants are creditors within the meaning of Section 3536. And as far as being family members, the Master noted that the claims at issue were not “support obligations” or the like, but instead traditional fiduciary breach allegations. In making that last ruling, the court made clear that the decision in Garretson v. Garretson, 306 A.2d 737 (Del. 1973)— which had concluded that a wife, seeking maintenance and support from her husband, was not a Section 3536 creditor—is to be narrowly read to only cover support obligations owed to a current spouse or other dependents.  In other words, the Garretson exception is only applicable to pre-existing support obligations owed to current spouses and other dependents and which obligations are not derived from a litigation judgment. And the court again expressly made clear that a tort claimant is a 3536 creditor. (See Master’s report, page 11 (citing Gibson v. Speegel, C.A. No. 124 (Del. Ch. May 30, 1984) and Parsons v. Mumford, 1989 WL 63899 (Del. Ch. June 14, 1989)).

     Of course, the biggest takeaway from the Mennen decisions is that Delaware courts enforced the spendthrift provision at issue despite the arguably unsympathetic facts.


William M. Kelleher, Director
Gordon, Fournaris & Mammarella, P.A.