In Re: Estate of Norris, J. Appeal of: PeoplesBank ( 2016 )

J. A09013/16
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
IN RE: ESTATE OF JOHN H. NORRIS, : IN THE SUPERIOR COURT OF
JOHN H. NORRIS LIFE INSURANCE : PENNSYLVANIA
TRUST AGREEMENT :
:
APPEAL OF: PEOPLESBANK, : No. 1117 MDA 2015
A CODORUS VALLEY COMPANY, :
TRUSTEE :
Appeal from the Order Entered May 27, 2015,
in the Court of Common Pleas of York County
Orphans’ Court Division at No. 67-08-1482
IN RE: ESTATE OF JOHN H. NORRIS, : IN THE SUPERIOR COURT OF
JOHN H. NORRIS LIFE INSURANCE : PENNSYLVANIA
TRUST AGREEMENT :
: No. 1178 MDA 2015
APPEAL OF: :
YVONNE RENEE PLOURDE GURZELL :
Appeal from the Order Entered May 27, 2015,
in the Court of Common Pleas of York County
Orphans’ Court Division at No. 6708-1482
BEFORE: FORD ELLIOTT, P.J.E., JENKINS AND PLATT,* JJ.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED JULY 20, 2016
PeoplesBank, a Cordorus Valley Company (“the Bank”), appeals from
the order entered May 27, 2015, removing it as co-trustee of the John H.
Norris inter vivos life insurance trust (“the Trust”). Yvonne Rene Plourde
Gurzell (“Gurzell”) has cross-appealed from the same order. After careful
* Retired Senior Judge assigned to the Superior Court.
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review, we vacate the order, reinstate the Bank as co-trustee, and remand
for further proceedings.
The trial court has aptly summarized the history of this case, in
relevant part, as follows:
John H. Norris (“Decedent”) executed a Last
Will and Testament on February 8, 2005. Decedent
died on September 28, 2008. The York County
Register of Wills issued Letters Testamentary on
October 9, 2008 to Anna L. Norris, Decedent’s wife.
The will named Anna L. Norris as executrix of the
estate and as individual trustee of [the Trust].
American Guaranty & Trust Company was named
corporate trustee from the Deed of Trust signed
February 21, 2000 and amended May 17, 2000.
American Guaranty & Trust Company has since been
purchased by Royal Bank of Canada Trust Company
(“RBC”). RBC resigned as corporate trustee on
December 29, 2008 having never received or
administered any trust assets. [The Bank] accepted
the successor trusteeship on December 20, 2012.
[The Bank] received trust assets from Mrs. Norris
and began service on December 21, 2012.
Decedent was survived by his wife, children
from his first marriage and step-children.
Mary Florence Norris Michel, Patricia Jane Norris
Slaughter and John C. Norris are Decedent’s children
from his first marriage. [Gurzell], Samantha R.
Plourde and Jeffery James Plourde are Decedent’s
step-children. In his will, Decedent left his personal
and household effects, including automobiles, and
insurance on that property to his wife, Anna Norris.
Decedent gives the residue of the estate, real and
personal to the trustee or trustees under the Deed of
Trust signed February 21, 2000, as amended
May 17, 2000 under which American Guaranty &
Trust Company, is named as the trustee, in trust, to
treat it as an addition to the principal subject to that
deed as it exists at Decedent’s death. The will
names Anna Norris as executrix with [] Gurzell as
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replacement executor [sic] should Anna Norris not
qualify for any reason. The will does not name any
other beneficiaries aside from Anna Norris.
Trial court opinion, 10/28/15 at 1-2.
Under [Paragraph XXIII(C) of the Deed of
Trust], it is mentioned that the individual trustee is
authorized at any time, and from time to time by an
instrument in writing delivered to the other trustee
serving, to remove the corporate trustee without
stating any reason for such action, provided he or
she simultaneously by written instrument appoints
another corporate trustee in its place. Under D, no
successor trustee shall be obliged to examine the
accounts, records or acts of a previous trustee, nor
shall any such trustee in any way or manner be
responsible for any act or omission to act on the part
of any such previous trustee or such individual
trustee. Any claim or action against any such
trustee shall, in any event, be filed by a beneficiary
in the appropriate court. Subparagraph E mentions
that any individual trustee may resign at any time
without court approval. Under F, the fiduciaries
serving are given the power to invest the principal
and/or income of the trust estate in any assets or
security. Lastly, subparagraph G provides that the
corporate trustee shall receive compensation in
accordance with its standard schedule of fees in
effect while its services are performed.
Id. at 3-4.
On or about August 12, 2013, [the Bank]
notified Mrs. Norris of its intent to resign as
co-trustee. On August 14, 2013, [the Bank] filed a
Petition for Adjudication/Statement of Proposed
Distribution for [the Trust]. The case was listed for
the September 11, 2013 audits with the Honorable
Judge Penny L. Blackwell presiding. [The Bank] filed
its accounting and gave proper notice of the audit to
all interested parties. At the time of the
September 11, 2013 audit no objections were filed
as to [the Bank]’s accounting, save for counsel for
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John C. Norris, one of Decedent’s children,
expressing no objections to the account itself or to
[the Bank] withdrawing, but that a successor trustee
should be named before [the Bank] could withdraw.
[The Bank] agreed that Mrs. Norris should select a
successor pursuant to the terms of the trust and that
no selection has been made at the time by
Mrs. Norris. [Gurzell] was also present during the
audit as one of the beneficiaries but made no
objections at the call of the audit or filled [sic] any
written objections by the end of that business day.[1]
Judge Blackwell rescheduled the matter for a
subsequent hearing on October 1[6], 2013 to resolve
pending matters.
At the October 16, 2013 hearing, new petitions
were filed and counsel for [Gurzell] entered his
appearance. Counsel requested an additional
sixty days to discuss the matters pending and
determine the issues that would be the subject of a
hearing. The parties agreed that [the Bank] can
remain involved for the time being, that its
investment strategy is appropriate and that it will not
be responsible for losses to the trust from the date of
the close of the accounting until the date that funds
are transferred.
On November 18, 2013, Mrs. Norris filed a
Petition to Appoint Successor Trustee and Authorize
Payment of Expenses. Counsel Trust Company
located in York, Pennsylvania was identified as the
1
Gurzell takes issue with the statement that no objections were raised to
the Bank’s Petition for Adjudication/Statement of Proposed Distribution
presented for audit on September 11, 2013. According to Gurzell, she
appeared in person, without counsel, and voiced her objections. (Gurzell’s
brief at 2; notes of testimony, 9/11/13 at 3.) The trial court found that
while Gurzell did appear at the September 11, 2013 audit hearing, she did
not actually voice any objection to the Trust accounting. (Trial court
opinion, 10/28/13 at 21-22.) Gurzell did not file any written objections as
required by local rule. (Id. at 22.) While counsel for Gurzell filed a petition
to stay the adjudication of the Bank’s accounting, no formal objections to the
Trust accounting were actually filed. (Id. at 22.) The issue is not germane
to the instant appeal.
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successor trustee. On November 7, 2013, [the
Bank] filed an Answer to Petition to Appoint
Successor Trustee and Authorize Payment of
Expenses. In its Answer, [the Bank] did not object
to the appointment of Counsel Trust as its successor
and indicated that any issues concerning Mrs. Norris’
loans did not preclude a confirmation of its
accounting.[2] On November 22, 2013, [Gurzell]
filed a Motion to Stay Executrix’s Petition to Appoint
Successor Trustee and Authorize Payment of
Expenses Pending Adjudication of Executrix’s
Accounting for the Norris Trust. In [her] Petition,
[Gurzell] alleged that Mrs. Norris should provide
documentation as to the funding of the Marital and
Residual Trusts and also questions some expenses
incurred by the estate.
On November 25, 2013, Judge Blackwell issued
an Order directing that [the Bank]’s action to defer
payments from the trust is deemed reasonable given
the status of the case. In addition, it was ordered
that no successor corporate guardian can occur
unless all parties agree to the appointment and/or by
order of court after a hearing. Another hearing for
the request to stay payment was scheduled for
July 9, 2014 before this Court.
At the July 9, 2014 hearing this Court indicated
that Mrs. Norris had filed an inventory and directed
that an estate accounting should be filed within
sixty days. [The Bank] was not permitted to resign
until this Court could further review the record and
see if a decision could be made. [The Bank] was
permitted to file[] a memorandum of law addressing
the topic of due diligence when taking trust funds.
The memorandum of law was filed on July 17, 2014.
On July 22, 2014, this Court stayed Mrs. Norris’
Petition to Appoint Successor Trustee and Authorize
Payment of Expenses pending adjudicating of the
estate accounting. [The Bank] indicated that it is
2
This is a reference to a $450,000 loan from the Bank to Mrs. Norris which
Mrs. Norris contends should be repaid from the estate. (Trial court opinion,
10/28/15 at 4.)
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only involved in the trust accounting and has no role
in the estate accounting.
On January 28, 2015, [Gurzell] filed a Motion
to Compel Distribution for the Residuary Trust for
litigation expenses. A hearing was held on
January 28, 2015 that concerned the estate
accounting and subpoenas issued in regards to
documents from an accountant. The parties were
directed to come up with a case management plan
so that the Court could address the remaining issues.
A subsequent hearing was held on May 27, 2015.
[The Bank] indicated that [Gurzell]’s objections dealt
with the estate accounting not the trust accounting.
[The Bank] requested its administration adjudicated
so that funds could be transferred for further
administration. [Gurzell] alleged that the trust
should not be transferred until the residuary trust
accounting is reconciled. [The Bank] concurred on
the appointment of its successor and indicated that it
assumed no liability for its predecessor. [Gurzell]
alleged that there were pending objections on the
residuary trust accounting. This Court issued an
Order removing [the Bank] as trustee and appointing
Counsel Trust as successor trustee at the conclusion
of the May 27, 2015 hearing.
On June 12, 2015, [the Bank] filed a Petition
Seeking Confirmation of Trust Accounting and
Amendment of the Court’s May 27, 2015 Order
Removing [the Bank] as Trustee. On June 23, 2015,
Mrs. Norris filed an Answer to [the Bank]’s Petition
Seeking Confirmation of Trust Accounting and
Amendment of the Court’s May 27, 2015 Order
Removing [the Bank] as Trustee. [The Bank] also
filed a Notice of Appeal to the Superior Court on
June 26, 2015 before this Court could decide its
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June 12, 2015 Petition.[3] On July 1, 2015, this
Court issued an Order Directing [the Bank] to File [a]
Statement of Matters Complained [of] on Appeal.
[The Bank] filed [its] 1925(b) statement on July 13,
2015. A Notice of Cross-Appeal to the Superior
Court was filed on July 9, 2015 by [] Gurzell []. On
July 10, 2015, this Court issued an Order Directing
[Gurzell] to File [a] Statement of Matters
Complained [of] on Appeal. [Gurzell] filed [her]
1925(b) statement on July 20, 2015. [The Bank]
and [Gurzell] now appeal to the Superior Court from
this Court’s Order issued on May 27, 2015.
Id. at 4-7.
The Bank has raised the following issues for this court’s review:
A. Did the Orphans’ Court’s removal of the
Trustee sua sponte, without a hearing, fail to
comply with the requirements of 20 Pa.C.S.
§§ 3183, 3184, and 7766?
B. Did the Orphans’ Court’s removal of the
Trustee sua sponte, without a hearing, violate
the consent Order dated November 25, 2013,
ordering that no successor corporate trustee
shall be appointed “unless all parties agree to
the appointment and/or by order of court after
a hearing,” and the Order dated July 22, 2014,
staying the appointment of a successor trustee
pending the adjudication of the Trustee’s
accounting?
3
The trial court indicates that it was inclined to amend the order of May 27,
2015, in order to allow the Bank to resign as opposed to being removed.
(Trial court opinion, 10/28/15 at 15.) An order removing a trustee is a final
order proper for appellate review. In re Georgiana’s Estate, 458 A.2d
989, 991 (Pa.Super. 1983), affirmed, 475 A.2d 744 (Pa. 1984). Therefore,
the Bank was required to file its appeal notice within 30 days.
Pa.R.A.P. 903(a).
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The Bank’s brief at 2.4
This Court recently reaffirmed our standard of review
of an Orphans’ Court decree:
When reviewing a decree entered by the
Orphans’ Court, this Court must
determine whether the record is free
from legal error and the court’s factual
findings are supported by the evidence.
Because the Orphans’ Court sits as the
fact-finder, it determines the credibility
of the witnesses and, on review, we will
not reverse its credibility determinations
absent an abuse of that discretion.
However, we are not constrained to give
the same deference to any resulting legal
conclusions. Where the rules of law on
which the court relied are palpably wrong
or clearly inapplicable, we will reverse
the court’s decree.
In re Estate of Hooper, 80 A.3d 815, 818
(Pa.Super. 2013).
When the Orphans’ Court arrives at a legal
conclusion based on statutory interpretation, our
standard of review is de novo and our scope of
review is plenary. Brown v. Levy, Pa. , 73
A.3d 514, 517 (2013).
In re Estate of Fuller, 87 A.3d 330, 333 (Pa.Super. 2014).
The Probate, Estates and Fiduciaries (“PEF”) Code, Section 7766,
“Removal of trustee,” provides, in relevant part, as follows:
(a) Request to remove trustee; court
authority.--The settlor, a cotrustee or a
beneficiary may request the court to remove a
4
Gurzell raises substantially the same issues on appeal and agrees with the
Bank that the trial court’s order of May 27, 2015, removing the Bank as
trustee, was in error.
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trustee or a trustee may be removed by the
court on its own initiative.
(b) When court may remove trustee.--The
court may remove a trustee if it finds that
removal of the trustee best serves the
interests of the beneficiaries of the trust and is
not inconsistent with a material purpose of the
trust, a suitable cotrustee or successor trustee
is available and:
(1) the trustee has committed a
serious breach of trust;
(2) lack of cooperation among
cotrustees substantially impairs the
administration of the trust;
(3) the trustee has not effectively
administered the trust because of
the trustee’s unfitness,
unwillingness or persistent failures;
or
(4) there has been a substantial
change of circumstances. A
corporate reorganization of an
institutional trustee, including a
plan of merger or consolidation, is
not itself a substantial change of
circumstances.
(d) Procedure.--The procedure for removal and
discharge of a trustee and the effect of
removal and discharge shall be the same as
that set forth in sections 3183 (relating to
procedure for and effect of removal) and 3184
(relating to discharge of personal
representative and surety).
20 Pa.C.S.A. § 7766(a), (b) & (d).
[R]emoval of a trustee is a drastic remedy which
should be employed only when clearly necessary.
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In Re White, 321 Pa.Super. 102, 104, 467 A.2d
1148, 1150 (1983), rev’d. on other grounds, 506
Pa. 218, 484 A.2d 763 (1984). An order removing a
trustee will only be reversed however, if there has
been an abuse of discretion. Crawford’s Estate,
340 Pa. 187, 190, 16 A.2d 521, 523 (1940).
In re Francis Edward McGillick Foundation, 594 A.2d 322, 332
(Pa.Super. 1991), reversed in part on other grounds, 642 A.2d 467 (Pa.
1994).
Section 3183 of the PEF Code provides,
The court on its own motion may, and on the petition
of any party in interest alleging adequate grounds for
removal shall, order the personal representative to
appear and show cause why he should not be
removed, or, when necessary to protect the rights of
creditors or parties in interest, may summarily
remove him. Upon removal, the court may direct
the grant of new letters testamentary or of
administration by the register to the person entitled
and may, by summary attachment of the person or
other appropriate orders, provide for the security
and delivery of the assets of the estate, together
with all books, accounts and papers relating thereto.
Any personal representative summarily removed
under the provisions of this section may apply, by
petition, to have the decree of removal vacated and
to be reinstated, and, if the court shall vacate the
decree of removal and reinstate him, it shall
thereupon make any orders which may be
appropriate to accomplish the reinstatement.
20 Pa.C.S.A. § 3183.
Here, the first three subsections of 20 Pa.C.S.A. § 7766(b) are clearly
inapplicable. There is no allegation that the Bank has committed a serious
breach of trust, that there is a lack of cooperation between the Bank and
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Mrs. Norris as co-trustees, or that the Bank has not effectively administered
the Trust. The trial court relied on Subsection (4), a substantial change of
circumstances. See In re McKinney, 67 A.3d 824, 832 (Pa.Super. 2013)
(a showing that the current trustee has administered the trust in a way that
undermined or harmed the beneficiaries’ interests is not needed for a
no-fault removal of a trustee for a substantial change in circumstances).
According to the trial court, the Bank’s desire to resign as corporate trustee
is, in and of itself, a “substantial change of circumstances” which permits
removal. (Trial court opinion, 10/28/15 at 18.) We disagree. As explained
further infra, there is a significant difference between discharge and
removal. The PEF Code does not allow no-fault removal of a trustee anytime
a trustee requests to resign.
In addition, in any trustee removal action, the plain language of the
statute requires that removal best serve the interests of the beneficiaries of
the trust. In re McKinney, 67 A.3d at 831, citing 20 Pa.C.S.A. § 7766(b).
The trial court found that Mrs. Norris has been prejudiced by the delay in
adjudication of the Bank’s accounting. (Trial court opinion, 10/28/15 at
16-17.) According to the trial court, the Trust is “at a standstill” with no
distributions able to be made to Mrs. Norris until the issue of the Bank’s
resignation and accounting is resolved. (Id. at 17.) However, the trial court
acknowledges that any delay was caused by Gurzell, not the Bank. (Id. at
16-17.) In addition, the Bank disputes the trial court’s assertion that
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Mrs. Norris is not receiving distributions of income from the Trust while the
matter is stayed. (The Bank’s brief at 18 n.7.)
Furthermore, the trial court failed to hold a hearing on the matter as
required by 20 Pa.C.S.A. § 3183, which provides that,
The court on its own motion may, and on the petition
of any party in interest alleging adequate grounds for
removal shall, order the personal representative to
appear and show cause why he should not be
removed, or, when necessary to protect the rights of
creditors or parties in interest, may summarily
remove him.
Contrary to the trial court’s reference to “Mrs. Norris’ request to remove [the
Bank] as trustee,” Mrs. Norris never petitioned for removal of the Bank.
(Trial court opinion, 10/18/15 at 17.) Rather, Mrs. Norris acquiesced in the
Bank’s petition to resign by identifying a successor corporate trustee. The
Bank was removed on the court’s own motion. There is no allegation that
summary removal was necessary to protect the rights of creditors or parties
in interest. In fact, as stated above, the trial court relied on Section 7766’s
no-fault removal provision and indicated that, “this Court was inclined to
amend its Order issued on May 27, 2015 in order to allow [the Bank] to
resign as opposed to being removed[.]” (Id. at 15.) The trial court
explicitly did not find any fault on behalf of the Bank as to its administration
of the Trust. (Id. at 10.) Therefore, before it could be removed, the Bank
was statutorily entitled to an evidentiary hearing. Matter of Estate of
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Velott, 529 A.2d 525, 527 (Pa.Super. 1987). Summary removal was
inappropriate and unwarranted.
The trial court states that at the May 27, 2015 hearing, counsel were
given the opportunity to present argument as to the Bank’s potential
removal and appointment of Counsel Trust Company as successor trustee.
(Trial court opinion, 10/28/15 at 11.) However, the purpose of the May 27,
2015 hearing was to address outstanding discovery motions related to
objections to the estate accounting. No witnesses were sworn and no
testimony was offered on behalf of any party. The order scheduling the
May 27 proceeding specifically stated that no testimony would be taken. In
addition, while the parties discussed the resignation of the Bank and
appointment of a successor corporate trustee, the Bank’s “removal” was
never discussed since no one had petitioned for its removal. The trial court
failed to hold a hearing in accordance with 20 Pa.C.S.A. § 3183 before
ordering the Bank’s removal as trustee.
We also agree that the order sua sponte removing the Bank as
trustee was contrary to at least two prior orders of court, including the
November 25, 2013 consent order by Judge Blackwell specifically directing
that no successor corporate trustee can be appointed without agreement of
all the parties and/or by order of court after a hearing. Neither contingency
had occurred in this case; the parties had not consented to appointment of a
successor corporate trustee, and no hearing had been held on the issue.
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The trial court states that the Bank’s status has remained in limbo for nearly
two years, and “This Court also highly doubts that the Honorable
Judge Blackwell intended for [the Bank] to continue their involvement for
nearly two years after a successor trustee was identified.” (Trial court
opinion, 10/28/15 at 10.) Nevertheless, the November 25, 2013 order,
which has never been amended or rescinded, could not be overruled by a
court of coordinate jurisdiction. Commonwealth v. Starr, 664 A.2d 1326,
1331 (Pa. 1995) (“[T]his Court has long recognized that judges of coordinate
jurisdiction sitting in the same case should not overrule each other[’s]
decisions.”).
Similarly, the July 22, 2014 order stayed Mrs. Norris’ Petition to
Appoint Successor Trustee and Authorize Payment of Expenses pending
adjudication of the Bank’s trust accounting. There has never been an
adjudication of the accounting. It was improper for the trial court to
summarily remove the Bank as trustee without lifting the stay and holding a
hearing.
Resignation and removal are not interchangeable. The trial court
correctly observes that under 20 Pa.C.S.A. § 7770,5 a successor trustee is
not liable for the acts of its predecessor. (Trial court opinion, 10/28/15 at
14.) Therefore, the Bank is not liable for any acts or omissions of RBC.
5
“A successor trustee shall not be personally liable for the acts or omissions
of the trustee’s predecessor and shall have no duty to investigate the acts or
omissions of the predecessor.” 20 Pa.C.S.A. § 7770.
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(Id.) The trial court states that, “While [the Bank’s] accounting should have
been adjudicated, we find no reason to further discharge [the Bank] from
liability under § 3184 when § 7770 specifically states that a successor
trustee shall not be personally liable.” (Id. at 15.) However, under
Section 3184,6 a trustee is discharged from all future liability, not only acts
or omissions of a predecessor trustee. By removing the Bank as a trustee
under Section 7766 instead of granting its petition for resignation following
an adjudication and discharge under Section 3184, the Bank was
substantially prejudiced. The removal of a trustee, even on a no-fault basis,
does not shield the trustee from all future liability. Resignation, following
adjudication and discharge, shields the trustee from future liability, while
removal does not. Therefore, the distinction is crucial. There were no
grounds for removal and the Bank was entitled to an adjudication of the
Trust accounting and discharge.
6
After confirmation of his final account and
distribution to the parties entitled, a personal
representative and his surety may be discharged by
the court from future liability. The court may
discharge only the surety from future liability,
allowing the personal representative to continue
without surety, upon condition that no further assets
shall come into the control of the personal
representative until he files another bond with
sufficient surety, as required by the register.
20 Pa.C.S.A. § 3184.
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Order vacated. The Bank is hereby reinstated as corporate trustee.
Remanded for further proceedings consistent with this memorandum.
Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 7/20/2016
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