Martin, C. v. Paul, S. and Martin, C. ( 2023 )

J-A27032-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
CHRISTOPHER MARTIN, : IN THE SUPERIOR COURT OF
INDIVIDUALLY AND AS TRUSTEE OF : PENNSYLVANIA
THE DANIEL R. PAUL & SUSAN L. :
PAUL IAPT 12/14/11 :
:
Appellant :
:
:
v. : No. 944 MDA 2021
:
:
SUSAN L. PAUL, INDIVIDUALLY AND :
AS PERSONAL REPRESENTATIVE OF :
THE ESTATE OF DANIEL R. PAUL AND :
COREY W. MARTIN, INDIVIDUALLY :
AND AS TRUSTEE OF THE DANIEL R. :
PAUL AND SUSAN L. PAUL IAPT :
12/14/11 :
Appeal from the Order Entered June 23, 2021
In the Court of Common Pleas of Columbia County Orphans’ Court at
No(s): 2016-OC-142
BEFORE: DUBOW, J., McLAUGHLIN, J., and COLINS, J.*
MEMORANDUM BY COLINS, J.: FILED: MARCH 29, 2023
Christopher Martin (“Christopher”) appeals from the September 27,
2019 order1 removing him as trustee of the Daniel R. Paul and Susan L. Paul
Irrevocable Asset Protection Trust dated 12/14/2011 (“APT”) and directing
that a farm property owned by the APT (“Atta Farm property” or “the
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
1 As explained in more detail below, the orphans’ court did not provide notice
of entry of the September 27, 2019 order or note the same on the docket until
June 23, 2021, at which point Christopher filed this timely appeal.
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Property”) be sold with proceeds in the amount of $278,213.71 allocated to
Susan L. Paul (“Susan”) and with any excess amount returned to the APT. We
affirm in part, vacate in part, and remand for further proceedings.
This Court has previously set forth the relevant background to this
dispute:
Susan is the mother of Christopher and his brother, Cory W.
Martin (“Cory”).[2] In 1985, Susan married Daniel R. Paul
(“Daniel”). With the help of Daniel, Christopher formed
Christopher A. Martin Wildlife Management, Inc. (“Company”) in
2005. Susan and Daniel purchased real property, on June 3,
2009, located on Atta Road in Stillwater, Pennsylvania []. On July
1, 2009, Susan and Daniel entered into a five-year commercial
lease contract with Christopher, individually and on behalf of the
Company, to allow the Company to conduct horse boarding and
related business at the Atta Farm property. That same day, the
Company began operating a horse boarding service at Atta Farm.
On December 14, 2011, Susan and Daniel executed a revocable
living trust agreement, the Daniel R. and Susan L. Paul Family
Trust (“Family Trust”). The Family Trust named Susan and Daniel
as settlors and trustees of the Family Trust. The Family Trust
contained several sub-trusts, including a Survivor’s Trust and the
APT.
The Family Trust provided, in relevant part, as follows:
It is the primary purpose and intent of this Trust to provide
for the management of the Settlors’[3] assets both presently
and during any future period of disability. This Trust
Agreement is a chosen alternative preferred to guardianship
or formal conservatorship proceedings that are conducted in
and supervised by a court of law. This Trust Agreement
____________________________________________
2While Cory is a party to the action below, he has not filed a brief in this
appeal.
3 The “Settlors” are Susan and Daniel. The “Survivor,” as used in the
agreement, refers to the surviving settlor. Family Trust § 4.1.
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shall serve as a simplified means of accomplishing both
lifetime and death transfers of both Settlors’ assets.
***
ARTICLE TWO
– Reservation of Rights –
2.1. The Settlors reserve the following rights, individually as
to their respective interest in Tenants-in-Common property
and as to their respective Sole and Separate property, to be
exercised at any time and from time to time by a written
instrument effective immediately upon its execution during
their joint lives without consent or participation of any
other person:
(a) Settlors may amend this Trust, in whole or in part,
or to revoke this Trust agreement in its entirety (by a
writing delivered to a Trustee other than themselves
if such Trustee is serving) and to remove any or all of
their respective interests in their respective property
transferred to this Trust.
[* * *
(d) Settlors may direct any Trustee as to the
retention, acquisition, or disposition of any Trust
assets by a writing delivered to such Trustee. . . .]
***
2.3. Upon the death of either Settlor, this Trust shall be
irrevocable and non-amendable subject, however, to any
power of appointment, right of withdrawal or right of
revocation hereinafter granted to the Survivor concerning
property held in the Survivor’s Trust as provided in
Article Five.
***
ARTICLE FIVE
– Administration/Distribution of Survivor’s Trust –
5.1. The Survivor shall retain full (and unhindered) general
power of appointment of all property held in the
Survivor’s Trust, including the power to alter, amend or
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revoke, in whole or in part, any and all provisions (including
the revocation and appointment of any Trustee of the
Survivor’s Trust) concerning such property held in the
Survivor’s Trust.
***
ARTICLE EIGHT
– Estate Distribution Upon Death of Survivor –
***
8.1. If any of the following named beneficiaries referenced
below—who are receiving separate allocation(s) of Settlors’
(respective) properties—do not survive the last Settlor to
die, then such allocation(s) shall be distributed as per the
remainder Trust Estate below Section 8.2.
***
(e) CHRISTOPHER A. MARTIN, Wife/Settlor’s son,
shall receive all interest in Wife/Settlor’s property
located at 34 Atta Road/Stillwater, Pennsylvania
17878.
8.2. CHRISTOPHER A. MARTIN & CORY W. MARTIN,
Wife/Settlor’s sons, shall each receive equal (1/2)
portions of the remainder—remaining after all of the
above allocations (if any) of the Trust Estate.
***
ARTICLE NINE
– Successor Trustee Appointments –
9.1. The Settlors reserve the power to remove any Trustee
during their joint lives and to appoint other or additional
Trustees not presently named as Successor Trustee at the
creation of this Trust.
[9.2. The Settlors shall serve as Co-Trustees (as heretofore
appointed) until . . . their death.
9.3. Upon . . . [the] death of the first Settlor to die, the other
Settlor shall serve as sole Trustee. . . .]
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9.4. Upon the (i) resignation or (ii) inability to serve because
of a medical/mental condition causing impairment of normal
administrative abilities (as evidenced by a medical
certificate from his or her attending physician) or (iii) death
of the surviving Settlor/Trustee then CHRISTOPHER [A.]
MARTIN (Wife’s Son) shall serve as Trustee of this Trust.
***
ARTICLE SEVENTEEN
– Asset Protection Trust –
17.1. BE IT KNOWN that the Settlors affirm their right of
transfer and assignment of portions or all of their property
of the (preceding) Revocable Trust Estate to another
individual(s) whether by a lifetime gift or by a transfer at
death, outright, or IN TRUST. To that end, it is the Settlors’
intent with the funding of the following prescribed
irrevocable sub-trust (of the Revocable Living Trust Estate)
to preserve the principal assigned therein by vesting the
same to the intended remainderman beneficiaries of this
irrevocable, sub-trust component (of Settlors’ Revocable
Living Trust Estate) hereinafter referred to and identified as
the Asset Protection Trust (APT). The primary purpose
and intent of the APT is to reasonably avoid preventable
governmental “spend-downs” of Settlors’ estate otherwise
charged for services the Settlors may qualify to receive
through state-and-federal-partnered Medicaid entitlement
program(s) as defined under Title XIX of the Social Security
Act/42 U.S.C. § 1396 et seq.
17.2. Settlors hereby acknowledge and exercise the right to
allocate, assign, and transfer any potion or all of the
principal amount of the Revocable Living Trust Estate
deemed under the revocable, general power of appointment
control of the Settlors whether in cash or in kind—or directly
from the Settlors outside the Trust (and/or directly from
other individuals) to this Irrevocable Asset Protection Trust
(APT) (subtrust) portion described hereunder, subject to the
terms of this Article. All such irrevocable transfers assigned
hereto shall be deemed a part of this APT . . .
17.3. Settlors now disclaim unhindered rights to reclaim,
appoint or otherwise use any principal of this APT, or that
may be transferred to this APT, to or for their benefit, their
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estate, their creditors, or their creditors’ estate—subject,
however, to the stipulations and terms otherwise provided
under this Article.
17.4. Settlors retain the right to receive all
Distributable Net Income (DNI) of this APT for their
joint lifetimes, and to the survivor of them for his/her
lifetime, on at least an annual or more frequent basis.
17.5. Subject to the stipulations and terms otherwise
provided under this Article, Trustee may not reverse or re-
assign any allocations of corpus/principal of this APT back to
the Settlors.
17.6. NOTWITHSTANDING the above, in the event that an
invasion of principal of this APT would then otherwise be
allowable under Pennsylvania state (and federal) law—or
under the laws of Settlors’ state-of-domicile if then other
than Pennsylvania—without disturbing the full asset-
preservation intent of this APT and Settlors are in personal
need of additional funds over and above the income
distributions provided herein to adequately care for their
health, safety, and reasonable comfort, then Trustee may
allocate portions of principal of this APT from time to time
as may be necessary or appropriate in Trustee’s unhindered
discretion for Settlors’ benefit when such needs are not
being met by the DNI amounts (or other sources of income)
allowable to Settlors under the terms of this APT.
(a) In such case, Trustee may make principal
distributions to enhance Settlor’s provisions of food,
clothing and shelter and other comforts if Trustee
determines in its sole discretion that such distributions
would be in Settlors’ best interests but ONLY when
taking into account the possible reduction or forfeiture
of Medicaid (or other governmental) benefits that may
result from any such distribution(s) event.
(b) In such case, Trustee is authorized to make
distributions for Settlors’ benefit for payments of
taxes, supplemental medical or therapeutic care,
furniture and furnishings, adaptive aids, benefits
overpayments (if any), and other such items as might
be reasonably calculated to enhance the quality of
Settlors’ life but only, however, if such distributions
do not affect the level of the governmental aid and
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entitlements that would otherwise inure to Settlors or
to supplant or replace any governmental aid or other
public entitlement funds that may be endowed for
their benefit through the establishment of this APT.
To reaffirm: Trustee is not authorized to make any
distributions for Settlors’ benefit that would otherwise
jeopardize Settlors’ qualification to receive
governmental aid benefits.
***
17.7. . . .
***
(c) NOW THEREFORE, any and all such
assets/funds/real estate transferred from the
Revocable Living Trust to the APT or directly to the
APT outside of the Revocable Living Trust Estate shall
be transferred and assigned to [Christopher, as the
Trustee of the APT.]
***
17.9. . . .
***
(b) The vested beneficiary(s) of the APT, the
proportionate, distributable amounts of income . . .
shall be defined, determined and designated as
provided in Article Eight (supra) of this Trust as
amended thereto but irrevocably vested,
notwithstanding subsequent amendments to said
Trust, as to the initial funding date of this APT.
***
17.10. The APT beneficiary(s) so designated to receive
portions or all of Settlors’ revocable Trust Estate and
portions or all of Settlors’ irrevocable APT Trust Estate (as
per this Article) shall be determined and identified as
provided in Article Eight (supra) and such designation(s)
shall become irrevocable as pertaining to the assets of
this APT upon the initial funding of the APT.
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[Family Trust, Preamble, §§ 2.1, 2.3, 5.1, 8.1-2, 9.1-4, 17.1-7,
17.9-10 (some emphasis in original; some emphasis added).]
On February 27, 2012, Susan and Daniel executed a deed
conveying the Atta Farm property to Christopher, as trustee of the
APT, and put the Atta Farm property in the APT, pursuant to the
Family Trust provisions. After Daniel died testate on May 30,
2013, Susan administered Daniel’s estate as its personal
representative. Following Daniel’s death, the relationship
between Susan and Christopher deteriorated, resulting once in
police intervention for an alleged theft.
On September 10, 2013, Susan ostensibly executed a
Restatement of the Family Trust (“Restated Trust”). . . .
In large part, the terms of the Restated Trust are substantially
and materially the same as the terms of the original Family Trust.
The most striking change accomplished by the Restated Trust,
however, was to remove Christopher as trustee and to name Cory
successor trustee of the Restated Trust and trustee of the APT.
Notwithstanding the preamble set forth in the Restated Trust,
Susan essentially “modified” the original Family Trust/APT to
remove Christopher as trustee of the APT and name Cory as new
trustee of the APT.
Acting on his new position, Cory executed a quit claim deed on
August 3, 2014, purporting to transfer the Atta Farm property
from [Cory, as trustee of the APT, to Susan and Daniel, as trustees
of the Family Trust.] Subsequently, Susan executed a quit claim
deed on July 6, 2015, appearing to transfer the Atta Farm property
from [Susan, as surviving trustee of the Family Trust to Cory, as
trustee of the APT.]
On August 17, 2016, Christopher filed a petition against Susan
and Cory to remove Cory as the trustee of the APT and direct that
the Atta Farm property remain an asset of the APT. . . . [D]uring
a status conference, Susan and Cory indicated they wanted to sell
the Atta Farm property and place the proceeds of the sale into
investments for the benefit of Christopher, if the court determined
he was entitled to those proceeds.
The court conducted a bench trial on July 13, 2017, during which
it heard testimony from, inter alia, Christopher[ and] Susan . . . .
At trial, Christopher testified on his own behalf that he had a falling
out with Susan in the 1990’s or 2000, after which he did not speak
to Susan and Daniel for ten or eleven years. Christopher said he
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reconnected with Susan and Daniel approximately in 2008, when
he moved in with them. After Susan and Daniel purchased the
Atta Farm property, Christopher and his wife lived at Atta Farm
while the Company operated a horse boarding business on the
farm.
Christopher again had a falling out with Susan after Daniel died.
While Christopher and his wife were still living on the Atta Farm
property, Christopher’s brother, Cory, removed a flatbed trailer
from the farm property. Christopher reported the incident to the
police, who found the trailer at the residence of Susan, with whom
Cory lived, and arrested Susan and Cory for stealing the
equipment. Christopher did not renew the lease on Atta Farm and
received a notice from Susan’s counsel in September 2014, to
vacate the property in thirty days. By October 7, 2014,
Christopher and his wife left the Atta Farm property.
Susan also testified at trial. Susan said she and Christopher had
a tumultuous relationship. They fell out in 1993, after which they
did not speak again until 2009. In January 2012, Susan attempted
to punch Christopher after the two had a verbal altercation. In
early 2013, Christopher put out to pasture one of Susan’s horses
boarded at Atta Farm, because Susan had been late several times
to pay the $ 450.00 monthly boarding fee. After Daniel died in
May 2013, Christopher would not speak to Susan. Susan
explained she believed she owned the trailer that Cory had taken
from the Atta Farm property in May 2014. Susan stated
Christopher reported the incident to police and had Susan and
Cory arrested, even though Christopher knew they merely
intended to borrow the trailer. In September 2014, Susan sent
Christopher an eviction notice. . .
Susan acknowledged she formed the Restated Trust in September
2013, to remove Christopher as trustee of the APT and replace
him with Cory as trustee. Susan claimed the August 3, 2014 quit
claim deed purporting to transfer the Atta Farm property from the
APT to her, as trustee of the Family Trust, was just a mistake,
because she knew she could not remove an asset from the APT
which was also an irrevocable trust. Susan said she ameliorated
the error when she executed the July 6, 2015 quit claim deed,
appearing to convey the Atta Farm property to Cory, as trustee of
the APT. Susan explained she had intended to keep the Atta Farm
property in the APT, despite the Restated Trust and the 2014 quit
claim deed. . .
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. . . On January 2, 2018, the [o]rphans’ [c]ourt entered an opinion
and verdict, which declared the Atta Farm property irrevocably
part of the APT. The decision then [stated] that “Christopher had
an irrevocable vested interest in the Atta Farm once the property
[was] transferred to the [APT and that o]wnership of the Atta
Farm [property] must properly be transferred to Christopher.”
Martin v. Paul (“Martin I”), No. 118 MDA 2018, 2019 WL 1490572, at *1-7
(Pa. Super. April 3, 2019) (unpublished memorandum) (footnote and record
citations omitted; references to parties and other key individuals modified for
readability).
Susan filed an appeal from the January 2, 2018 order, challenging the
orphans’ court award of immediate ownership of the Property to Christopher
as well as the court’s failure to rule on her requests to remove Christopher as
trustee for the APT and to compel a sale of the Property. In the initial appeal,
we determined that we could not address Susan’s issues related to
Christopher’s removal and the sale of the Property, because the orphans’ court
had not yet ruled on them. Id. at *8. We did reach Susan’s argument
concerning the court’s transfer of title of the Property to Christopher, finding
that, under the APT, Christopher would become owner of the Property when
Susan dies, while Susan was entitled, as the surviving settlor, to regular
lifetime distributions of income generated from APT assets. Id. at *8-10. We
thus concluded that the orphans’ court improperly awarded title of the
Property to Christopher as his “role regarding the Atta Farm property is limited
to trustee with a vested beneficial interest in the APT,” while we also rejected
Susan’s argument that she had an ownership interest in the Property as she
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was only a lifetime beneficiary. Id. at *10-11. We therefore vacated the
court’s order and remanded for clarification or correction on the issue of
ownership of the Property and for further proceedings on Susan’s requests
that Christopher be removed as trustee and the Property be sold. Id. at *11.
Following oral argument and the submission of briefs, the orphans’ court
issued an order and accompanying opinion on September 27, 2019, providing
for Christopher’s removal as trustee of the APT, the sale of the Property, and
the reimbursement of $278,213.71 from the sale to Susan with any remainder
to the APT. Opinion and Order, 9/27/19, at 4-5. In its Pa.R.A.P. 1925(a)
opinion, the court clarified that it ordered the sale of the Property and
reimbursement to Susan pursuant to its power to modify a trust based upon
circumstances that were not anticipated by the settlor under Section
7740.2(a) of the Pennsylvania Uniform Trust Act (“UTA”), 20 Pa.C.S. §
7740.2(a). Rule 1925(a) Opinion, 12/30/21, at 3-4. The court further opined
that Christopher’s removal as trustee was appropriate under Section
7766(b)(1)-(3) of the UTA, 20 Pa.C.S. § 7766(b)(1)-(3), because he
committed a serious breach of the trust, failed to effectively administer the
trust through unfitness, unwillingness, and persistent failures, and as a result
of his lack of cooperation with Susan. Rule 1925(a) Opinion, 12/30/21, at 6-
7.
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On appeal,4 Christopher presents the following issues for our review:
I. Did the lower court exceed its authority vested by 20 Pa.C.S.[
§] 7740.2(a) and (c) when it modified a noncharitable irrevocable
trust and directed the trust be distributed in a manner which not
only defeats its primary purpose, but in a manner that is expressly
prohibited by the terms [of the] trust?
II. Did the lower court commit error by modifying a noncharitable
irrevocable trust without the consent of all beneficiaries in a
manner which does not protect the interests of the irrevocably
vested remainder beneficiary as required by 20 Pa.C.S.[ §]
7740.1(d)(2)?
III. Did the lower court commit an error of law and/or an abuse
of discretion when the court (1) declined to rule on the appellant’s
request to remove a purported trustee who had been acting on
behalf of the trust [and] (2) cite[d], among other things, to
actions of the disputed trustee in removing the appellant as
trustee under 20 Pa.C.S.[ §] 7766?
IV. Did the lower court [commit] error by exceeding its authority
in 20 Pa.C.S.[ §]7781(b) and 20 Pa.C.S.[ §]7766(c) to remedy an
alleged breach of trust when it invade[d] an irrevocable
noncharitable trust and direct[ed] $278,213.71 be reimbursed to
the settlor?
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4 Christopher did not immediately appeal from the September 27, 2019 order
and instead filed an application for leave to appeal nunc pro tunc on January
21, 2020. The orphans’ court denied the petition on May 14, 2020, and
Christopher appealed from that order. On appeal, this Court ruled that the
lower court prothonotary did not provide notice of entry of the September 27,
2019 order and specify on the docket that notice was given as required by
Pa.R.Civ.P. 236. Martin v. Paul (“Martin II”), No. 823 MDA 2020, 2021 WL
1886067, at *3 (Pa. Super. May 11, 2021) (unpublished memorandum). We
therefore vacated the denial of nunc pro tunc relief and remanded for the
prothonotary to docket the September 27, 2019 order in full compliance with
Rule 236 so that Christopher could refile his appeal. Id. at *3-4. On June
23, 2021, following remand, the prothonotary noted on the docket that proper
notice of the September 27, 2019 order was given. Christopher then timely
filed the appeal presently before this Court.
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Christopher’s Brief at 4 (unnecessary capitalization, emphasis, and suggested
answers omitted).
“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.” In re Trust Created Under
the Will of Cohen, 188 A.3d 1208, 1210 (Pa. Super. 2018) (citation and
brackets omitted). Furthermore,
The findings of a judge of the orphans’ court division, sitting
without a jury, must be accorded the same weight and effect as
the verdict of a jury, and will not be reversed by an appellate court
in the absence of an abuse of discretion or a lack of evidentiary
support. This rule is particularly applicable to findings of fact
which are predicated upon the credibility of the witnesses, whom
the judge has had the opportunity to hear and observe, and upon
the weight given to their testimony.
In re Jackson Charitable Trust, 174 A.3d 14, 23 (Pa. Super. 2017) (citation
omitted).
The interpretation of a trust presents a question of law as to which our
standard of review is de novo, and our scope of review is plenary. Id. at 29.
The pole star in interpreting trusts is the settlor’s intent, which must be
ascertained from the language of the trust. Id. A court must give effect, to
the extent possible, to all words and clauses in the trust document and shall
not resort to canons of trust construction except where the language of the
trust is ambiguous or conflicting and the settlor’s intent cannot be garnered
from the plain language. Id.; In re Estate of Loucks, 148 A.3d 780, 782
(Pa. Super. 2016).
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We first address Christopher’s third issue in which he challenges his
removal as trustee of the APT. Christopher asserts that the APT, by its own
terms, only permitted removal of the trustee during the settlors’ joint lives,
and therefore Susan lacked authority to place his brother, Cory, in the role of
the APT trustee, which she purported to do in the Restated Trust of September
10, 2013, executed several months after Daniel’s death. Christopher notes
that, in his 2016 petition that initiated this case, he raised the issue of whether
Cory was properly appointed as trustee, and yet the orphans’ court declined
to rule on his request in its most recent order. Furthermore, Christopher
contends that the lower court improperly based his removal on the fact that
he did not make all of the payments required under his lease to the Property,
as well as his 2014 eviction from the Property by Susan, even though Susan
and Daniel had always represented to him that they would remain responsible
for the mortgage, taxes, and insurance on the Property.
Removal of a trustee is governed by Section 7766(b) of the UTA, which
provides as follows:
(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;
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(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.
20 Pa.C.S. § 7766(b).
The orphans’ court found that grounds for Christopher’s removal existed
under subsection (b)(1), (2), and (3), based upon Christopher’s serious
breach of the trust, his lack of cooperation with his cotrustee, and his
unfitness, unwillingness, and persistent failures in the administration of the
APT. Rule 1925(a) Opinion, 12/30/21, at 6-7. The court specifically found
that Christopher was “incapable or unwilling to perform his fiduciary duties,”
he “failed to make even one payment towards the mortgage” or “make any
profit” from the farm, and his relationship with Susan was so strained that it
resulted in physical altercations, an eviction, and Susan’s arrest. Id.; see
also Opinion and Order, 9/27/19, at 4-5. The court further concluded that
removing Christopher as trustee was in the best interests of the beneficiaries
of the APT and that it was not inconsistent with the purpose of the APT.
Opinion and Order, 9/27/19, at 4-5.
Upon review, we initially agree with Christopher that Susan lacked
authority to remove him as trustee of the APT and place Cory in that position,
which she purported to do in the Restated Trust executed in September 2013.
Pursuant to the Family Trust, the settlors only had authority to remove a
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trustee and appoint a successor trustee “during their joint lives.” Family Trust
§ 9.1; cf. id. § 5.1 (providing that surviving settlor had authority to remove
the trustee of the Survivor’s Trust). When Daniel died in May 2013, Susan,
as the surviving settlor, thus lost any ability to remove and replace
Christopher as trustee. The Restated Trust’s substitution of Christopher with
Cory as trustee of the APT accordingly had no legal effect, a fact that this
Court acknowledged in our initial decision in this matter. See Martin I, 2019
WL 1490572, at *5, 10 & n.1 (stating that Christopher remained APT trustee
as of the date of our 2019 decision and that Susan lacked authority to modify
the APT to remove Christopher). While the orphans’ court did not specifically
address the issue, the lower court implicitly recognized that Christopher, not
Cory, was the APT trustee at the time of its decision by ruling on Susan’s
request that Christopher be removed as trustee and not addressing
Christopher’s alternate claim that Cory should be removed.
Turning to the merits of Christopher’s removal, we agree with the
orphans’ court’s determination that grounds for removal existed under Section
7766(b)(3), which requires that “the trustee has not effectively administered
the trust because of the trustee’s unfitness, unwillingness or persistent
failures.” 20 Pa.C.S. § 7766(b)(3).5 The record here shows Christopher’s
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5 The lower court found that Christopher’s removal was proper under
subsection (b)(1), (2), and (3); however, we discuss only subsection (b)(3)
as the statute only requires that any one of the paragraphs under subsection
(b) be satisfied. 20 Pa.C.S. § 7766(b).
(Footnote Continued Next Page)
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almost complete unwillingness to undertake any acts to fulfill his role as
trustee of the APT. See 20 Pa.C.S. § 7766, Uniform Law Comment (describing
a trustee’s “unwillingness” to include “cases where the trustee refuses to act”
as well as “a pattern of indifference to some or all of the beneficiaries”); see
also Trust Under Agreement of Taylor, 164 A.3d 1147, 1159-60 (Pa.
2017) (courts may rely on commentary of drafters of Uniform Trust Code in
interpreting UTA). The Family Trust was established in December 2011, and
the Property was transferred by deed to him as trustee of the APT, in February
2012. N.T., 7/13/17, at 41, 50-51; Christopher’s Exhibit 18. At the time of
the transfer of the Property into the APT, Christopher resided at and ran a
horse boarding business at the Property pursuant to a five-year lease executed
in July 2009 with Susan and Daniel as landlords. Christopher’s Exhibit 7. After
the transfer of the Property to the APT, Christopher never entered into a new
lease for the Property, and, instead, he continued to act as if Daniel and Susan
(and ultimately Susan, after Daniel’s May 2013 death) were the landlords and
owners of the Property, with Christopher eventually being “evicted” by Susan
in October 2014. N.T., 7/13/17, at 41-42, 106, 125-26.
____________________________________________
Furthermore, we note that our analysis of Christopher’s role as APT trustee is
complicated by the fact that Christopher acted in two other roles relevant to
this case, as the proprietor of the horse boarding business being run on the
Property and in his status as a vested remainder beneficiary of the APT assets.
We focus here on Christopher’s role as trustee, but that necessarily entails our
review of his decision to allow himself to persist in his money-losing business
on the Property and consideration of the threat his actions caused to his
remainder interest in the trust.
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While Daniel and Susan also bear some responsibility for their continued
attempts to control the Property following its transfer into the APT, Christopher
made no effort to fulfill his duties as trustee of the APT during the period when
he was living on the Property. A trustee has the duty of prudent
administration of a trust, that is the trustee “shall administer the trust as a
prudent person would, by considering the purposes, provisions, distributional
requirements and other circumstances of the trust and by exercising
reasonable care, skill and caution.” 20 Pa.C.S. § 7774. Furthermore, a trustee
must “take reasonable steps to take control of and protect the trust property.”
20 Pa.C.S. § 7779; see also In the Matter of Estate of Campbell, 692 A.2d
1098, 1102 (Pa. Super. 1997) (trustee has duty of “receiv[ing] trust property
and administer[ing] it”) (citation omitted). Christopher was aware of the
Family Trust, as well as his role as the trustee of the APT, at the date of the
trust’s execution in December 2011, and he was also contemporaneously
informed by Daniel that the Property was being transferred to him, as trustee.
N.T., 7/13/17, at 101-03. However, Christopher never “really pa[id] attention
to [his status as trustee and the transfer of the Property] because . . . it’s my
mom and my [step-]dad, why would I worry about such things?” Id. at 103;
see also id. at 127 (stating that he was “the guy with the shovel” who did
not pay attention to “[a]ll these papers and stuff”). Christopher thus made
no attempt “to take control of and protect the [] property” of the APT, nor did
he exercise “reasonable care, skill and caution” in administering the APT. 20
Pa.C.S. §§ 7774, 7779.
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Christopher also failed to take action to preserve the APT’s assets for
the benefit of both beneficiaries of the trust, Susan as the lifetime beneficiary
who was entitled to regular lifetime distributions from that trust, and
Christopher as the remainder beneficiary of the APT assets. As our Supreme
Court has explained, “a trustee’s interest [in the trust] is in performing the
agreed duty to administer the trust assets for the benefit of the beneficiaries
in accordance with the terms established by the settlor.” In re Trust Under
Deed of Walter R. Garrison, Nos. 61-63 MAP 2022, ___ A.3d ___ (Pa., filed
January 19, 2023), slip op. at 9. “The primary duty of a trustee is the
preservation of the assets of the trust and the safety of the trust principal,”
as measured by the standard of what an ordinary prudent investor would
maintain in the care of their own estate. In re Estate of Warden, 2 A.3d
565, 573 (Pa. Super. 2010) (citation omitted). “If a trust has two or more
beneficiaries, the trustee shall act impartially in investing, managing and
distributing the trust property, giving due regard to the beneficiaries’
respective interests in light of the purposes of the trust.” 20 Pa.C.S. § 7773;
see also In re Scheidmantel, 868 A.2d 464, 482 (Pa. Super. 2005)
(“Subject to the specific language of the trust instrument, a trustee acting
consistently with the law of Pennsylvania must exercise discretion in
preserving the balance of interests between successive beneficiaries.”)
(citation omitted).
Here, Christopher admitted that, during the period he resided on the
Property, he never paid the $2,000 rent, real estate taxes or insurance for the
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business, nor did he contribute to the payment of the mortgage; instead, his
only financial contribution was for repairs and some of the equipment used for
the horse boarding business. N.T., 7/13/17, at 34-35, 39-40, 96-98, 128,
155. Susan reiterated that she and Daniel were responsible for paying the
mortgage, taxes, and insurance on the Property during the entire time that
Christopher ran the business without any contribution from her son. Id. at
154-55, 176, 184-85. In addition, Daniel made substantial financial
contributions towards the business, loaning the corporation formed to run the
business more than $230,000 during the years of the business’s existence.
Id. at 135, 139-41, 143-44. The corporation had accumulated losses of
approximately $321,000 over the years (with losses of $75,537, $38,297, and
$13,295 in 2012, 2013, and 2014, respectively), showing that the business
was “underwater,” according to the business’s accountant. Id. at 114-16,
132-33, 135-36. Furthermore, although Christopher only worked briefly at
the grocery store Daniel owned in 2008 and 2009, the store continued to pay
Christopher $400 per month after he left the job and through the date of his
eviction from the Property in October 2014. Id. at 103-04, 157-58. Based
upon the failure of the property to generate income, Susan ultimately decided
to take the proceeds from one of Daniel’s life insurance policies and pay off
the balance of the mortgage on the property. Id. at 174, 176.
The record thus shows that Christopher, as trustee, did not take
sufficient actions to preserve and manage the Property for his or Susan’s
benefit, as the beneficiaries. The horse boarding business was never
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profitable, and there was no apparent pathway for the business to become
profitable. Furthermore, rather than Susan receiving “all Distributable Net
Income [] of th[e] APT” during her lifetime, Family Trust § 17.4 (emphasis
omitted), she and Daniel were compelled to subsidize Christopher’s business
during its entire existence. Christopher also did not act to protect his
remainder interest in the APT that would have afforded him the opportunity
to inherit the Property following Susan’s death. Without an established viable
business in place, Christopher was destined to rely on Susan’s continuing
subsidies, which she was under no obligation to provide.
We therefore concur in the orphans’ court’s finding that Christopher did
“not effectively administer[] the trust because of [his] unfitness, unwillingness
or persistent failures.” 20 Pa.C.S. § 7766(b)(3). However, Section 7766
imposes three additional requirements before removal may be ordered; the
court must additionally find that (1) “removal of the trustee best serves the
interests of the beneficiaries of the trust”; (2) removal “is not inconsistent
with a material purpose of the trust”; and (3) “a suitable cotrustee or
successor trustee is available.” 20 Pa.C.S. § 7766(b); Taylor, 164 A.3d at
1157. Here, the orphans’ court made findings that the first two requirements
were met, see Opinion and Order, 9/27/19, at 4-5, and we agree that his
removal serves the interests of the beneficiaries based upon Christopher’s
track record of administering the trust and that his removal was not
inconsistent with a material purpose of the trust.
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However, the orphans’ court did not make a finding that “a suitable []
successor trustee is available” to replace Christopher. 20 Pa.C.S. § 7766(b).
As discussed above, although Susan attempted to name Cory, her other son,
as the APT trustee in 2013, this appointment was without legal effect.
Furthermore, in the order and opinions under review, the orphans’ court did
not address whether Cory could adequately serve as Christopher’s
replacement. Therefore, we are constrained to vacate the orphans’ court
order to the extent it removed Christopher as trustee of the APT. We remand
for the lower court to make a finding whether “a suitable [] successor trustee
is available,” id.; if the court determines that there is a suitable successor,
then the court may order Christopher’s removal and name the successor
trustee.
We now turn to Christopher’s remaining appellate issues, in which he
challenges the modification of the APT to permit the sale of the Property and
the return of a portion of the proceeds of the sale to Susan. Christopher first
argues that modification was improper under Section 7740.2(a) of the UTA,6
____________________________________________
6 Christopher also argues that the orphans’ court violated Section 7740.1 of
the UTA because his interest as a nonconsenting beneficiary was not
“adequately protected.” See 20 Pa.C.S. § 7740.1(d)(2). We disagree. The
structure of the UTA, as well as the language of the related commentary, make
clear that Section 7740.2—the orphans’ court’s stated grounds for
modification—and Section 7740.1 are among several alternate, independent
grounds for modification or termination of a trust. See generally 20 Pa.C.S.
§§ 7740.1-7740.6; see also 20 Pa.C.S. § 7740(b) (listing available statutory
remedies for modification or termination); 20 Pa.C.S. § 7740.1, Uniform Law
Comment (distinguishing grounds for termination or modification under
(Footnote Continued Next Page)
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noting that Susan and Daniel’s “primary purpose and intent” in creating the
APT was “to reasonably avoid preventable governmental ‘spend-downs’ of
Settlors’ estate otherwise charged for services the Settlors may qualify to
receive through state-and-federal-partnered Medicaid entitlement
program(s)[.]” Family Trust § 17.1 (emphasis omitted). Christopher asserts
that, by allowing Susan to regain access to Property placed into the APT, she
would be potentially forced to spend down those assets to become eligible for
Medicaid Long-Term Care benefits or that she would be rendered temporarily
ineligible for benefits based upon a less-than-fair-market value transfer within
the program’s 60-month look-back period.7 Christopher further argues that
the ordered return of $278,213.71 from the proceeds of the sale of the
Property was in error as it directly contradicted the asset-protection purpose
____________________________________________
Section 7740.1 from Section 7740.2 and other sections). Nothing in the
language of any of the relevant UTA provisions, or related caselaw, indicates
that a court proceeding with modification under Section 7740.2 must also
comply with the requirements of Section 7740.1.
7 See 55 Pa. Code § 178.104a (establishing look-back period pursuant to the
federal Social Security Act); Brenckman v. Department of Human
Services, 222 A.3d 38, 43 (Pa. Cmwlth. 2019) (when an applicant has
transferred or disposed of assets for less than fair market value during the
look-back period, they will be “disqualified from receiving [Medicaid] for a
period equal to the number of months of average nursing home care that the
transferred assets could have purchased”) (citation omitted); Schell v.
Department of Public Welfare, 80 A.3d 844, 848-52 (Pa. Cmwlth. 2013)
(stating that, to establish Medicaid Long-Term Care eligibility, applicant’s
resources must fall under certain threshold and further that asset in trust can
constitute a countable recourse in certain circumstances).
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of the trust and that it disregarded his vested beneficial interest in the
Property.8
Under Section 7740.2 of the UTA, a court is authorized to modify a
noncharitable irrevocable trust based upon unanticipated circumstances:
The court may modify the administrative or dispositive provisions
of a noncharitable irrevocable trust, make an allowance from the
principal of the trust or terminate the trust if, because of
circumstances that apparently were not anticipated by the settlor,
modification, allowance or termination will further the purposes of
the trust. To the extent practicable, the modification or allowance
shall approximate the settlor’s probable intention.
20 Pa.C.S. § 7740.2(a). The comment to the statute provides that courts are
authorized to “apply equitable deviation” to modify “inopportune details to
effectuate better the settlor’s broader purposes” and that unanticipated
circumstances that will support modification may include the “failure [of the
settlor] to anticipate economic change.” 20 Pa.C.S. § 7740.2, Uniform Law
Comment. “While it is necessary that there be circumstances not anticipated
by the settlor before the court may grant relief [], the circumstances may
have been in existence when the trust was created.” Id. Moreover, we note
____________________________________________
8 Christopher also argues that the orphans’ court did not have authority to
order the return of $278,213.71 as a remedy for his breach of trust under
Section 7781 of the UTA. See 20 Pa.C.S. § 7781(b) (listing remedies that a
court may order for a trustee’s breach of trust). However, the lower court did
not cite Section 7781, nor did it base its decision on a breach of trust by
Christopher; instead, the court relied on its authority to modify the trust under
Section 7740.2 and directed that the sum be paid to Susan as
“reimbursement” for the mortgage and other expenses on the property.
Opinion and Order, 9/27/19, at 5.
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that the court’s ability to modify a trust under Section 7740.2 is broader than
under prior Pennsylvania law, which required “a finding that the settlor’s
original purpose ‘cannot be carried out or is impractical of fulfillment.’” 20
Pa.C.S. § 7740.2, Joint State Government Commission’s Comment to UTA
(quoting 20 Pa.C.S. § 6102 (repealed)); 1 Pa.C.S. § 1939 (drafting
commission’s comments may be consulted in construction of statute).
The orphans’ court determined that modification of the APT to permit
the sale of the Property was appropriate under Section 7740.2(a), because
the settlors could not have anticipated the fact that the Property would not
generate income or even be self-sustaining. Rule 1925(a) Opinion, 12/30/21,
at 3-4. The court found that Christopher’s actions of “not making a payment
toward the mortgage, taxes, or insurance [of the Property], all of which were
required as part of the lease agreement that [Christopher] signed” frustrated
the primary asset-protection purpose of the APT. Id. at 3. As the court
explained, if the Property “were to remain part of the trust, it will be more
likely that it will succumb to a tax sale than become property of [Christopher
as remainder beneficiary] due to [his] failure to make the required payments.”
Id. The court found that “the only reason the [Property] has not been
foreclosed upon . . . is due to [Susan] paying the balance of the mortgage.”
Id. at 4.
In addition, the orphans’ court found that Christopher’s actions
frustrated the second purpose of the APT to provide Susan, as the surviving
settlor, with the net income from the APT assets during her lifetime. Id. at 3.
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The court found that Christopher’s actions led to the trust producing no
income—and therefore no distributions to Susan—and further opined that, if
the Property remained in the trust, any revenue generated from the farm
would only be spent on upkeep rather than providing income to Susan. Id.
at 3-4. Finally, “based upon the fact that the entire mortgage was paid by
[Susan], when [it] should have been paid from income from [Christopher’s]
Horse Farm . . . and said payments were only made in an attempt to save the”
Property, the court determined that Susan “must be reimbursed from [the
ordered] sale [of the Property] in the amount she paid.” Id. at 4.
We find no abuse of discretion in the orphans’ court modification of the
APT to permit the sale of the Property and the reimbursement of $278,213.71
from the sale to Susan. The “circumstances . . . not anticipated by the
settlor[s],” 20 Pa.C.S. § 7740.2(a), that permit modification in this case are
the fact that the Property did not become self-supporting under Christopher’s
management. As explained above, Christopher never paid rent on the
Property when it was subject to a lease, nor did he ever contribute to the
payment of the mortgage, real estate taxes, or insurance after the Property
became an APT asset. The business was reliant on loans to stay afloat,
including more than $230,000 from Daniel. Moreover, there was no testimony
at the hearing that the horse boarding business was on a path to solvency,
nor was evidence offered that any other business could be operated on the
Property that would allow it to be self-sufficient. Therefore, the Property was
to remain a financial drain for Susan for however long Christopher remained
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on the Property and continued to do so after he vacated.9 While Daniel and
Susan were aware when they created the APT that they would need to support
Christopher in establishing his business, they could not have been aware how
extensive and how open-ended that financial backing would have to be. See
20 Pa.C.S. § 7740.2, Uniform Law Comment (stating that while the
circumstances that support modification must be unanticipated, they may
have been in existence when the trust was created).
In addition, the record supports the court’s finding that Susan’s use of
the proceeds from Daniel’s life insurance policy was made for the purpose of
preventing foreclosure on the Property. See Rule 1925(a) Opinion, 12/30/21,
at 4; N.T., 7/13/17, at 174, 176. While the court acknowledged evidence
showing that the policy was taken out with the intention to pay off the balance
of the mortgage when Daniel died, the court observed that Susan’s testimony
established that it was only necessary for her to use those funds—which were
paid to her individually, rather than into the trust—based upon Christopher’s
inability to turn his business into one that could at least cover the mortgage
payments after he had filled the barn with horses. See Rule 1925(a) Opinion,
12/30/21, at 4; N.T., 7/13/17, at 176, 183-84, 186.
____________________________________________
9 Susan testified at the 2017 hearing that she had continued to pay the
insurance and taxes on the property, as well as for necessary repairs, such as
a new furnace, since Christopher vacated the property. N.T., 7/13/17, at 181.
Furthermore, at a 2019 oral argument, Susan’s attorney represented that she
had been continuing to pay the insurance and taxes from her personal funds.
N.T., 6/4/19, at 10.
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Furthermore, the modification “will further the purposes of the” APT. 20
Pa.C.S. § 7740.2(a). While Christopher correctly identifies the design of the
APT to shield the settlors’ assets from potential Medicaid spend-down, the APT
also served the purpose of transferring the Property from the settlors to
Christopher and “preserv[ing] the principal assigned [in the APT and] vesting
the same to the intended remainderman beneficiar[y].” Family Trust § 17.1
(emphasis omitted). Due to mismanagement, the Property has been and
continues to be reliant on Susan’s financial support, which she is under no
obligation to provide. Permitting the sale of the Property would “preserve the
principal” of the APT, id., and would allow Christopher, as the remainderman,
to derive some benefit from the Property rather than allowing it to “succumb
to a tax sale.” Rule 1925(a) Opinion, 12/30/21, at 3. Moreover, while the
reimbursement of $278,213.71 from the Property’s sale does run counter to
the APT’s purpose of shielding the settlors’ assets from Medicaid as the funds
would be an available resource for Susan and subject to a potential spend
down before she would be eligible for Medicaid benefits,10 the reimbursement
only replaced funds Susan would have otherwise retained had Christopher
administered the Property such that the mortgage did not need to be paid off.
____________________________________________
10 See Schell, 80 A.3d at 848 (discussing the resource limit that cannot be
exceeded when applying for Medicaid Long-Term Care benefits). It does not
appear that the return of funds from the sale to Susan would trigger the 60-
month look-back period under the Medicaid program as it would not involve a
less-than-fair-market-value transfer by Susan.
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Accordingly, we affirm the orphans’ court’s September 27, 2019 order
to the extent it modifies the APT to allow for the sale of the Property and the
reimbursement of $278,213.71 to Susan. Furthermore, as discussed above,
we vacate the removal of Christopher as trustee and remand for consideration
of whether there exists a suitable successor trustee and, if the court answers
that question in the affirmative, to authorize Christopher’s removal and
appoint his replacement.
Order affirmed in part and vacated in part. Case remanded. Jurisdiction
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/29/2023
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