In Re: Hillcrest Trust, Appeal of: Certo, L.

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: HILLCREST TRUST : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
APPEAL OF: LOUIS M. CERTO, M.D. :
AND MARY KATHLEEN CERTO :
BLACKWELL, ESQ. :
:
:
: No. 1188 WDA 2020
Appeal from the Order Entered October 7, 2020
In the Court of Common Pleas of Allegheny County
Orphans’ Court at No: 02-17-4234
IN RE: 1999 IRREVOCABLE TRUST : IN THE SUPERIOR COURT OF
FOR THOMAS M. CERTO : PENNSYLVANIA
:
:
APPEAL OF: LOUIS M. CERTO, M.D. :
AND MARY KATHLEEN CERTO :
BLACKWELL, ESQ. :
:
: No. 1189 WDA 2020
Appeal from the Order Entered October 7, 2020
In the Court of Common Pleas of Allegheny County
Orphans’ Court at No: 02-17-4230
IN RE: TMC LEGACY TRUST : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
APPEAL OF: LOUIS M. CERTO, M.D. :
AND MARY KATHLEEN CERTO :
BLACKWELL, ESQ. :
:
:
: No. 1190 WDA 2020
Appeal from the Order Entered October 7, 2020
In the Court of Common Pleas of Allegheny County
Orphans’ Court at No: 02-17-4233
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BEFORE: OLSON, J., MURRAY, J., and PELLEGRINI, J.*
MEMORANDUM BY MURRAY, J.: FILED: January 28, 2022
In this appeal, which we consolidated sua sponte, Louis M. Certo, M.D.,
and Mary Kathleen Certo Blackwell, Esquire (Appellants), challenge the order
granting their petition for permission to resign as trustees of the TMC Legacy
Trust (Legacy Trust), and invalidating the second paragraph of Article Two,
Section 3 of the Legacy Trust as against public policy. Upon careful review,
we quash the appeal for lack of standing.
On January 4, 1999, Salvatore and Patricia Certo (collectively, the
Certos) settled the 1999 Irrevocable Trust of Thomas M. Certo (1999 Trust).
The Certos named their son, Thomas M. Certo (Thomas), as sole trustee. The
1999 Trust further designated Thomas, his wife Susan Certo (Susan), and
their children as beneficiaries. The 1999 Trust granted Thomas the power of
appointment to create a subtrust.
On January 14, 2005, in accordance with his power of appointment to
create a subtrust, Thomas settled the Hillcrest Trust. Thomas named Anthony
M. Tedesco as trustee, subject to removal and replacement at any time by the
then-serving trustee(s) of the 1999 Trust, i.e., Thomas. On March 26, 2007,
Thomas appointed himself as sole trustee of the Hillcrest Trust.
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* Retired Senior Judge assigned to the Superior Court.
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On December 23, 2009, the Certos settled the Legacy Trust, appointing
Thomas as the trustee. The Legacy Trust designated Thomas, Susan, and
their children as beneficiaries. Of note, the second paragraph of Article II,
Section III of the Legacy Trust included the following provision:
In the event that an action for annulment, divorce or separate
maintenance is instituted by the Grantors’ son, THOMAS M.
CERTO, or their daughter-in-law, SUSAN L. CERTO, at any time
during their marriage, SUSAN L. CERTO shall not be a permissible
beneficiary under this Article or any other provision of this Trust,
shall not serve as a Trustee hereunder and shall not hold any
power of appointment hereunder under this Article for as long as
said action remains pending. If said action results in an
annulment or divorce, the Trustees, in their sole and absolute
discretion, shall, upon the entry of a final decree of annulment or
divorce, identify an amount for SUSAN L. CERTO equal to the
value of the corpus of this Trust at that time divided by the number
of the Certo Family Members living at that time (for purposes of
this Agreement the Certo Family Members shall include THOMAS
M. CERTO, SUSAN L. CERTO and their children). The Trustees
shall distribute assets equal to one-third (1/3) of said amount
determined above to SUSAN L. CERTO within ninety (90) days of
the entry of a final decree or annulment or divorce. … Unless the
Trustees default in making any required distribution to SUSAN L.
CERTO pursuant to this paragraph, all rights, interests and powers
she may have as a beneficiary, trustee, holder of a power of
appointment or in any other capacity, in and to any trust under
this Agreement shall be terminated at the time of the entry of a
final decree of annulment or divorce.
Legacy Trust, Article II, Section 3, ¶ 2 (Paragraph 2). Thomas subsequently
transferred all assets in the 1999 Trust and the Hillcrest Trust to the Legacy
Trust.
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In March 2017, Susan filed for divorce. On July 21, 2017, Susan filed
citation petitions (collectively, Citation Petition)1 requesting the recording of
the trust agreements and the filing of an account for each trust. Susan
asserted that Thomas had violated his duties to the beneficiaries of the
Hillcrest Trust by transferring all trust assets to the Legacy Trust. Citation
Petition, 7/21/17, ¶ 18. Susan further claimed that Thomas had transferred
marital assets to the Hilcrest Trust and Legacy Trust. Id. ¶ 21. Susan
asserted, “[a]lthough the Trust seeks to limit her interest to one-third of the
assets, it is believed and therefore averred that provision is unenforceable to
limit [Susan’s] marital and beneficiary rights.” Id. ¶ 20 (emphasis added).
On October 3, 2017, Thomas filed a petition for a declaratory judgment
under Section 7535 of the Pennsylvania Judicial Code 2 and filed an amended
petition on October 27, 2017 (Declaration Petition). The Declaration Petition
sought a declaration that, pursuant to Paragraph 2, Susan is entitled only to
one-sixth (1/6) of the Legacy Trust corpus. Declaration Petition, 10/27/17,
¶ 4.
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1 All referenced petitions and court filings were filed at each of the three
orphans’ court docket numbers: 02-17-4234 (1999 Irrevocable Trust), 02-
17-4230 (Hillcrest Trust), and 02-217-4232 (Legacy Trust).
2See 42 Pa.C.S.A. § 7535 (“Any person interested … may have a declaration
of rights or legal relations in respect thereto[] … [t]o determine any question
arising in the administration of the estate or trust, including questions of
construction of wills and other writings.”).
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On November 27, 2017, Thomas resigned as trustee of the 1999 Trust,
the Hillcrest Trust, and the Legacy Trust. Thomas appointed Appellants, his
siblings, as co-trustees of each trust.
Susan subsequently filed a citation petition to reform the Legacy Trust
regarding the apportionment of trust assets (Reform Petition). Reform
Petition, 6/25/18. The Reform Petition challenged Paragraph Two as an
unlawful postnuptial provision and void against public policy. Id. ¶¶ 4, 41.
The Reform Petition further averred that Thomas fraudulently had transferred
marital assets to the Legacy Trust to preclude the equitable distribution of
those assets in divorce proceedings. Id., ¶ 20, 24-25.
On May 15, 2020, Appellants petitioned for a rule to show cause why a
successor trustee should not be appointed, and requested permission to resign
as trustees of the 1999 Trust, the Hillcrest Trust, and the Legacy Trust (the
Resignation Petition). Appellants averred, in part, that Thomas is the primary
beneficiary of the Legacy Trust; Susan and the children are secondary
beneficiaries; and trustees of the Legacy Trust were authorized to make
distributions to Susan only during her marriage to Thomas. Resignation
Petition, 5/15/20, at ¶¶ 16-18. Appellants advised that Thomas “asked
[Appellants] to re-appoint him as Trustee” of the 1999 Trust, the Hillcrest
Trust, and the Legacy Trust. Id., ¶ 49. Appellants cautioned, however, that
the children of Susan and Thomas objected because Thomas “is not fit to serve
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as Trustee due to beliefs that he is frequently under the influence of alcohol.”
Id., ¶ 50.
Susan did not object to the resignation of Appellants as trustees, but
filed a response requesting that the orphans’ court act on her Reform Petition.
Response to Citation, 6/25/18, ¶ 8. Susan further asserted that Thomas had
failed to effectuate the terms of their marital settlement agreement, in which
he had agreed to sell the marital residence, a Legacy Trust asset. Id., ¶¶ 9-
10.
In its August 21, 2020, Memorandum and Order, the orphans’ court
granted Appellants’ Resignation Petition, and permitted Appellants to resign
as trustees to all three trusts. Memorandum and Order, 8/21/20, at 1. The
orphans’ court directed that Appellants’ “exit duties” would be “consistent with
Pennsylvania law.” Id. at 1-2. The court appointed Colin Certo and Emily
Certo (Current Trustees), two adult children of Thomas and Susan, as trustees
of the Legacy Trust. Finally, the orphans’ court addressed Susan’s Reform
Petition, and concluded that Paragraph 2 of the Legacy Trust is void against
public policy. See Orphans’ Court Order, 8/21/20.
Appellants timely filed a motion for reconsideration regarding the
orphans’ court’s determination that Paragraph 2 is void as against public
policy. Motion for Reconsideration, 9/10/20, ¶ 106. Appellants did not
request reconsideration of their resignations. See id. The Current Trustees
did not join Appellants’ motion for reconsideration. Rather, Current Trustees
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filed a memorandum agreeing with the orphans’ court’s legal conclusion
regarding Paragraph 2. Current Trustees’ Memorandum of Law, 10/2/20, at
2. Further, Current Trustees informed the court that Appellants had concluded
their “exit duties,” and all assets and records of the Legacy Trust had been
transferred to the Current Trustees. Id. at 3.
On September 16, 2020, the orphans’ court granted reconsideration of
its prior determination regarding Paragraph 2. See Orphans’ Court Order,
9/16/20, at 1 (granting reconsideration and permitting the parties to present
written opposition to the matters complained of in the reconsideration
request). After oral argument, the orphans’ court denied the substantive relief
requested by Appellants based upon their lack of standing as former trustees
of the Legacy Trust. Orphans’ Court Order, 10/8/20, at 1. At each docket,
Appellants timely filed notices of appeal.3 Appellants and the orphans’ court
complied with Pa.R.A.P. 1925, and this Court subsequently consolidated the
appeal for disposition.
Appellants present two issues for our review:
1. Whether the lower court erred in holding that Appellants … lack
standing to challenge Susan L. Certo’s Petition for Citation and
to seek reconsideration of the [Orphans’] Court’s August 19,
2020, Memorandum Opinion and Order.
2. Whether the [Orphans’] Court erred in holding that Article Two,
Section Three, Second Paragraph of the [] Legacy Trust is void
as against public policy.
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3 Thomas did not appeal.
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Appellants’ Brief at 13 (issues renumbered).
Initially, we consider whether Appellants have standing to appeal the
October 8, 2020, Order. “Threshold issues of standing are questions of law;
thus, our standard of review is de novo, and our scope of review is
plenary.” Rellick-Smith v. Rellick, 147 A.3d 897, 901 (Pa. Super. 2016)
(citation omitted).
Pennsylvania Rule of Appellate Procedure 501 provides, “Except where
the right of appeal is enlarged by statute, any party who is aggrieved by an
appealable order, or a fiduciary whose estate or trust is so aggrieved, may
appeal therefrom.” Pa.R.A.P. 501. Our Supreme Court has explained,
[a]n individual has standing only if he or she is aggrieved, i.e.,
adversely affected or negatively impacted in a real and direct
fashion, by the proceedings at issue. To demonstrate that he or
she is aggrieved, an individual must establish a substantial, direct
and immediate interest in the proceedings. An individual’s
interest in the proceedings is substantial if it surpasses the
common interest of all citizens in procuring obedience to the law.
An individual’s interest is direct if there is a causal connection
between the asserted violation and the harm complained of, and
the interest is immediate if that causal connection is not remote
or speculative.
In re Miller, 27 A.3d 987, 992-93 (Pa. 2011) (internal quotation marks and
citation omitted).
Appellants state that on June 26, 2014, Louis M. Certo participated in
“exercise[ing] the Power of Appointment by deleting Article Two, Section 3 of
the Trust and Article Three, Section 1, and replacing them with” Paragraph 2,
the provision declared void by the orphans’ court. Appellants’ Brief at 53.
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Appellants claim standing because the orphans’ court has now declared that
action to be against public policy. Id. at 53-54.
Appellants also claim standing by virtue of their status “as resigning
Trustees whose ‘exit duties’ included the duty to protect the trust property
under 20 Pa.C.S.A. § 7767(a).” Appellants’ Brief at 55. Appellants assert
they filed this appeal to protect the Legacy Trust’s property. Id. at 55.
Appellants’ claims are unavailing.
Appellants’ status as resigning cotrustees is defined by statute:
Unless a cotrustee remains in office or the court otherwise orders,
a trustee who has resigned or been removed has the duties of a
trustee and the powers necessary to protect the trust property
until the trust property is delivered to a successor trustee
or other person entitled to it.
20 Pa.C.S.A. § 7767(a) (emphasis added). Section 7767 further requires “[a]
trustee who has resigned or been removed shall proceed expeditiously to
deliver the trust property within the trustee’s possession to the cotrustee,
successor trustee or other person entitled to it.” Id. § 7767(b).
The orphans’ court granted Appellants’ Resignation Petition regarding
Paragraph 2 on August 21, 2020. See Orphans’ Court Memorandum and
Order, 8/21/20, at 1. In an October 2, 2020, memorandum, Current Trustees
informed the orphans’ court that Appellants had “completed and fully
discharged” their duties as resigning trustees. Memorandum of Joint Trustees,
10/4/20, at 1. Appellants have not disputed Current Trustees’ representation.
Thus, applying Section 7767, Appellants did not retain “powers necessary to
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protect the trust property” beyond October 2, 2020. See 20 Pa.C.S.A. §
7767(a); see also 1 Pa.C.S.A. § 1921(b) (“When words of a statute are clear
and free from ambiguity, the letter of it is not to be disregarded under the
pretext of pursuing its spirit.”). Further, any interest of Appellants, by virtue
of their exercise of the Power of Appointment with regard to Paragraph 2,
concluded with the transfer of the trust assets to Current Trustees. See id.
Consequently, Appellants’ claim to standing on this basis fails.
Appellants also claim standing by virtue of Louis M. Certo’s status as a
“Business Trustee” of the Legacy Trust. Appellants’ Brief at 54. Appellants
cite Judicial Code Sections 7533 and 7535 to support this claim. Id. at n.3.
Section 7533 provides,
[a]ny person interested under a deed, will, written contract, or
other writings constituting a contract, or whose rights, status, or
other legal relations are affected by a statute, municipal
ordinance, contract, or franchise, may have determined any
question of construction or validity arising under the instrument,
statute, ordinance, contract, or franchise, and obtain a declaration
of rights, status, or other legal relations thereunder.
42 Pa.C.S.A. § 7533.
Section 7535 provides, in relevant part, as follows:
Any person interested, as or through an executor, administrator,
trustee, guardian, or other fiduciary, creditor, devisee, legatee,
heir, next of kin, or cestui que trust, in the administration of a
trust, or of the estate of a decedent, an infant, lunatic, or
insolvent, may have a declaration of rights or legal relations in
respect thereto:
(1) To ascertain any class of creditors, devisees, legatees, heirs,
next of kin, or others.
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...
(3) To determine any question arising in the administration of the
estate or trust, including questions of construction of wills and
other writings.
42 Pa.C.S.A. § 7535.
In determining whether Appellants have standing as the “business
trustee,” we look to the language of the Legacy Trust, mindful that the settlor’s
intent is the polestar of interpreting the provisions of the trust. See In re
Jackson, 174 A.3d 14, 29 (Pa. Super. 2017). “[T]he settlor’s intent must be
ascertained from the language of the trust, and we give effect, to the extent
possible, to all words and clauses in the trust document.” Id. at 30.
The Legacy Trust expressly set forth the responsibilities and authority
of “business trustees” as follows:
With respect to exercising the voting rights of any “Voting
Business Interest,” it is the Grantors’ intention and direction that
all such voting rights shall be vested solely in the committee of
Business Trustees as set forth and specifically named below. In
addition, although the Trustees that may serve hereunder
pursuant to Section 1 above (the “Primary Trustees”) shall
generally have full discretion over investment policy and
distributions over Income and principal over any trustee created
hereunder, subject to the restrictions imposed in this Agreement,
the Primary Trustees must obtain the consent of the committee of
Business Trustees prior to making a distribution of any Voting
Business Interest to a beneficiary. Also, the committee of
Business Trustees shall have the power to direct the Primary
Trustees to liquidate any investment held by any trust hereunder
and to lend funds to any entity owned by any trust created
hereunder.
...
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In the case of any vote regarding the distribution, transfer of sale
or all or substantially all of the equity or assets of any entity
described above, the unanimous vote of all Business Trustees shall
be required to authorize such action.
Legacy Trust, Article VII, Section 2.
Here, the orphans’ court’s invalidation of Paragraph 2 did not implicate
exercising of voting rights of any voting business interest, the distribution of
a business interest, the liquidation of a trust investment, the lending of trust
funds to another entity, or a vote regarding the distribution or transfer of sale
of all equity or assets of any trust entity. See id. As such, Appellants fail to
establish that the “business trustee” was “aggrieved” by the orphans’ court’s
invalidation of Paragraph 2. See Pa.R.A.P. 501. Accordingly, Louis M. Certo
does not have standing as a business trustee to the Legacy Trust.
Because Appellants lack standing to appeal, we quash.
Appeal quashed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/28/2022
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