DocketNumber: 3007 EDA 2019
Filed Date: 8/13/2020
Status: Precedential
Modified Date: 8/13/2020
J-A13004-20 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 IN RE: TRUSTS UNDER WILL OF : IN THE SUPERIOR COURT OF ROBERT L. MONTGOMERY, JR. : PENNSYLVANIA DECEASED FOR THE BENEFIT OF : H.BEATTY CHADWICK (TRUST NO. 6) : AND MARITAL TRUST UNDER WILL : OF ROBERT L. MONTGOMERY, JR., : DECEASED, FOR THE BENEFIT OF : ELIZABETH B. MONTGOMERY AS : APPOINTED BY THE WILL OF : No. 3007 EDA 2019 ELIZABETH B. MONTGOMERY, : DECEASED FOR THE BENEFIT OF H. : BEATTY CHADWICK (TRUST NO. 7) : : : APPEAL OF: H. BEATTY CHADWICK : Appeal from the Order Entered September 30, 2019 In the Court of Common Pleas of Montgomery County Orphans’ Court Division at No(s): No. 1977-X0448 BEFORE: BENDER, P.J.E., LAZARUS, J., and DUBOW, J. MEMORANDUM BY BENDER, P.J.E.: Filed: August 13, 2020 H. Beatty Chadwick (Appellant) appeals pro se from the orphans’ court’s adjudication of the 2018 accounts of two trusts created under the will of Robert L. Montgomery, Jr., (Decedent), and the will of Elizabeth B. Montgomery, the deceased wife of Decedent. Pursuant to the court’s adjudication, Appellant’s objections were dismissed and the payment of attorney’s fees to PNC Bank, N.A. (Trustee/Appellee) was approved. We affirm. As noted in a prior decision by this Court, responding to an earlier appeal filed by Appellant, this matter has a “long, torturous, and infamous” history. J-A13004-20 See In re Trusts Under the Will of Montgomery,161 A.3d 392
(Pa. Super. 2017) (unpublished memorandum). The terms of the trusts provided that Appellant was to be the lifetime beneficiary of the trusts and that after Appellant’s death, the principal of each trust was to be distributed to various charities. Specifically, with regard to the amount of the payment due Appellant, he was to receive a percentage of the lesser of the net income of the trust or a stated percentage of the fair market value of the principal of the trust. The present appeal arises from the filing of the fifth accounting of trust #6 and the third accounting of trust #7. As part of the petitions for adjudication of the accounts, Appellee requested the payment of attorney’s fees in the amount of $447,635.40 to cover the costs incurred by it, which were expended to defend itself against Appellant’s claims, both past and present. Following the filing of these petitions, Appellant filed objections alleging Appellee breached its fiduciary duties relating to the investment of the trusts’ assets and asserting that its request for attorney’s fees should be denied. A hearing was held on February 26, 2019, at which the court heard testimony and received evidence. On September 30, 2019, the court issued its adjudications, dismissing Appellant’s objections and approving the payment of the attorney’s fees. The orphans’ court also denied Appellant’s motion for reconsideration. Thereafter, Appellant filed a timely appeal. -2- J-A13004-20 We begin by setting forth our standard of review. Our standard of review of the findings of an Orphans’ Court is deferential. 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. In re Estate of Harrison,745 A.2d 676
, 678-79 (Pa. Super. 2000), appeal denied,563 Pa. 646
,758 A.2d 1200
(2000) (internal citations and quotation marks omitted). “The Orphans’ Court decision will not be reversed unless there has been an abuse of discretion or a fundamental error in applying the correct principles of law.” In re Estate of Luongo,823 A.2d 942
, 951 (Pa. Super. 2003), appeal denied,577 Pa. 722
,847 A.2d 1287
(2003). In re Fiedler,132 A.3d 1010
, 1018 (Pa. Super. 2016) (quoting In re Estate of Whitley,50 A.3d 203
, 206-07 (Pa. Super. 2012)). Appellant raises the following two issues for our review: 1. Where the trustee of trusts with a beneficiary entitled only to receive trust income invests for total return principally by capital appreciation and the trusts achieve substantial capital appreciation, did the court below err in dismissing objections to [a]ccounts that the trustee violated fiduciary duties by refusing to exercise its statutory power to adjust the total return of the trusts to produce income which will accomplish the purposes of the trusts as set forth in the terms thereof? 2. Whether the court below abused its discretion in allowing a trustee to collect from trusts additional counsel fees and -3- J-A13004-20 expenses of $477,635.40 for an [a]ccounting proceeding where $516,733.78 already had been allowed for such purposes, 1,874 hours were billed by counsel to represent the trustee in such proceeding where the evidentiary hearing was less than one day, and total fees and expenses allowed were 88% of the combined assets of the trusts? Appellant’s brief at 37. We have reviewed the certified record, the briefs of the parties, the applicable law, and the thorough 17-page opinion of the Honorable Lois E. Murphy of the Court of Common Pleas of Montgomery County, dated September 30, 2019. We conclude that Judge Murphy’s opinion properly disposes of the issues and accompanying arguments presented by Appellant. Accordingly, we adopt her opinion as our own and affirm the order dismissing Appellant’s objections. Order affirmed. Judge Dubow joins this memorandum. Judge Lazarus files a concurring statement in which President Judge Emeritus Bender and Judge Dubow join. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 8/13/20 -4- 1911 Jt���:l8€"J'R.if8'61U?t0'H.1:t�. 1 ;J,J o o <1� :io ,1 f'',' IN TiiE COURT OF COMMON PLEAS OF MONTGOMERY COUNTY, PENNSYLVANIA ORPHANS' COURT DIVISION No. 1977·X0448 • • • • • ESTATE OF ROBERT L. MONTOOMERY, JR., DECEASED Sur Trust for Herbert B. Chadwick (Trust No. 6) • • • • • The fifth account of PNC Bank, N.A.1, trustee of the testamentary trust created und<:r Item FOURTH(AX4) (hereinafter refered to as "trust No. 6") of the will of Robert L. Montgomery, Jr., Deceased, was called for audit on June 4, 2018. The objections filed therete by H. Beatty Chadwick (hereinafter ''the objectant") were heard on February 26, 2019, and the matter is now ripe for adjudication COUNSEL APPEARED AS FOLLOWS: DUANE MO'RRIS LLP By: Lewis R. Olshin, Esquire for the Accountant COMMONWEALTH OF PENNSYLVANIA OFFJCE OF THE ATTORNEY GENERAL By: David Dembe, Esquire, Deputy Attorney General as par�n: patriae, for charitable interests I. PNC Bank, N.A. succeeded Provident National Biink \Ylllch was named as a trustee in Item 'f6NTH of Robert Moncgon.,ery', Win. THIS DOCUMENT WAS DOCKETED AND SENT ON 09l30/2019 1977-X0448.105.3 Adjudication, Page� i �2 u (11 �§ u ,E 6:::,- .s l:Jg � ii UNREPRESENTED PARTY APPEARED o� AS FOLLOWS: �Q c:� �g H. Beatty Chadwick, objectant [ ls :S Q) 5� c:: t: it �� �.!:2 �� The account shows a balance of principal and income in the amount of $468,139.89 J! composed of stocks, bonds, cash, and cash equivalents as set forth on pages 18, 19 and 40. � fs �� Principal of$462,221.59 has been revalued as of February 15, 2018 at $571,026.86. � Cl> e: § e .2 � ·'= ti � ii The account was filed to acquaint interested parties with the transactions that have �f �� occurred during the period of this administration (April 7, 2014 to February 15, 2018) and to �� II<.:: al.� seek Court approval of the payment of certain legal fees and costs from principal. The trust L. 5- {: continues. " :S �� :::, )) "� -! 58 )\' 1t is stated that all parties in interest, including representatives of those not suijuris and ::, "g c: QI 0 .2? of those still unborn or otherwise undetermined, have had timely notice of the filing of the Cl) .m t§ li ::> ., 2: 161 A.3d 392(Table) (2017). 9 1977-X0448.105.3 Adjudication, Page 11 stated it is what is commonly known as a NIMCRUT (net income makeup charitable remainder uni trust) and described the origin of this type of trust as follows: You had this problem with the regular uni trust of depleting principal. The idea of the net income trust was to try to preserve the principal so you had that available for the remaindermen -- in these particular cases, charities -- but you were still providing income. And the net income makeup allowed you, basically -- in those years where you [ eamed) over the percentage you could pay out in addition to that percentage. (N.T. 187.) When asked ways to generate additional income. Mr. Davidson suggested the trust language could be modified to define post-contribution capital gains as income. (N.T. 190.) When asked about changing the allocation of assets to benefit an income beneficiary, Mr. Davidson testified: [W]hether you are 65/35, whether you're 60/40, 70/30-- l mean pick your range -- within that range you' re still balanced, per se, and you' re not changing the income generation versus the growth that much. But sometimes just a small tweak, even though you might free up only a couple hundred dollars, sometimes that makes a difference to an income beneficiary. So you can do those tweakings. It doesn't get you a whole lot of difference normally on the smaller trusts ... My understanding is that we're looking at trusts that collectively are between a million and $1. l million. And so you are looking at a little over a half a million apiece, which doesn't give you a lot of room to play. (N.T. 192-93). He commented that the present allocation of assets in this trust is in "a safe zone" and added: .. 1 think you will find that most trust companies will consider that to be a good total allocation for total return." (N.T. 194.) During cross examination by counsel for the trustee, Mr. Davidson suggested a trustee might change a 65/3 5 allocation to 70/30 "to ease some of the pressure that the trustee is under because of the income beneficiary." (N.T. 197.) Mr. Davidson acknowledged that he reviewed neither this Court's adjudications of the prior accounts filed for this trust nor the Superior 10 "t, 1977-X0448.105.3 Adjudication, Page 1 · 1ij �u s ") <::: (ti �§ o .E 5 .5, r� Court's opinion on this objectant's unsuccessful appeal from the last adjudication. He agreed s� Ill� t3'€ � � there is no language in the trust document giving the trustee the discretion to invade principal for �g e c:: :;i the income beneficiary. (N.T. 199.) He agreed that the trustee could not make a unilateral ss ��'o! c:: c:: change to the trust to allow for principal invasions for the income beneficiary. (N.T. 202.) i� 8� gi a �� Counsel for the trustee then presented the testimony of Neil Cass, a partner at the law � sc:: Ill s ,gIll 0) firm of Duane Morris. He testified that he served as co-trustee of this trust through the � § t:: .e 8 .5; adjudication of the last accounts, at which point his resignation became effective. Mr. Cass �i � c: �j tallied the surcharges that the objectant had sought in connection with the prior accounts of this :i 8 � 0, �� and the companion trust, and which were denied by this Court and the Superior Court, at !I I;:: 3:l-� i. �� 5- $897,408.93. He identified three Duane Morris invoices showing the fees incurred by and �iii :. . . :S Q� services rendered to the trustee for this trust and the companion trust through the appeal period. J) ::i ;8 �")� 7ii (Exh. A-14.) He stated that the amount being sought has been reduced to $447,635.40. He �! � 'tJ explained the extensive filings and proceedings that were required in the surcharge litigation. �� �f E::431 Pa. 542 ,246 A.2d 337(1968). The LaRocca factors include: (1) the amount of work performed; (2) the character of the services rendered; (3) the difficulty of the problems involved; (4) the importance of the litigation; (5) the amount of money or value of the property in question; (6) the degree of responsibility incurred; (7) whether the fund involved was created by an attorney; (8) the professional skil I and standing of the attorney in his profession; (9) the results he was able to obtain; (10) the ability of the client to pay a reasonable fee for the services rendered, and (10) very importantly, the amount of money or value of the property in question. LaRocca Estate,431 Pa. at 547, 246 A.2d at 339. See also, Wanamaker Trust, 30 Fiduc. Rep. 240 (O.C. Montg. 1980). In Thompson Estate,426 Pa. 270, pages 281- 282,232 A.2d 625, page 631, supra, the Court pertinently said: 'It is a 'well-entrenched rule of Jaw in this State that the responsibility for determining the amount of counsel fees rests primarily with the auditing judge. An executor or a trustee is an officer of the orphans' court and accountable to such court for all his actions of commission and omission in the performance of his fiduciary duties; such duty to account embraces all payments made from estate or trust funds by way of compensation to himself or his counsel. Thompson Estate, at 276, 678. (Slip opinion, pp. 11-12.) The evidence produced at the hearing established the extraordinary amount of work by counsel that was needed after the prior account was filed, which included defending the account against the objections, filing exceptions to the Court's adjudication, and litigating the objectant's appeal before the Superior Court. The trustee's counsel accomplished the tasks at hand at all stages, having fended off an $800,000+ surcharge request, having obtained a successful result on the exceptions before the Court en bane, and having prevailed 14 1977-X0448.105.3 Adjudication, Page 15 before the appellate court. These services were clearly necessary and were rendered by counsel from a highly-regarded law firm. The objectant, due to his training as an attorney," had the option of litigating without incurring any counsel fees. A corporate trustee cannot appear in propria persona and PNC was obligated to retain counsel who could defend it competently Accordingly, objections nos. 9 and 1 l are dismissed. The trustee established that the additional counsel fees now being sought are not duplicative of amounts previously considered by the Court and objection no. l O is dismissed. In addition. counsel for the trustee took pains to establish that the additional compensation being sought related only to legal work performed in connection with the litigation relating to the prior accounts up through the appeal process, not to time expended to substantiate the fees. Objections nos. 12 and 13 are also dismissed. Regarding objection no. 14, Mr. Cass testified he received commissions for his work as a trustee and charged for his time as an attorney when he was serving trust counsel. The objectant offered no evidence to the contrary and this objection is dismissed. Finally, the objectant suggests no additional fees and costs should be allowed on equitable grounds. No grounds for disapproving any of the trustees actions having been established, we find this objection no. 15 to be wholly without merit and it is dismissed. 7 The objectant was admitted to the practice of law in Pennsylvania in 1961, but his license has been suspended since 2005. 15 1977-X0448.105.3 Adjudication, Page 1 E s 'ti "'c:: �� O Cl) � § g� t� Cl·- ss'tls In the rider to question 14, Part I, of the petition for adjudication, the trustee requests ... <::: Cl c:: �O 8 approval of the fees and costs discussed at length above. Having determined the amounts were ss sc I [ 16 reasonable and necessary. we approve the payment of $232,925.61 from principal to Duane Cl) :S s� � � Morris. In Pait II to the rider, the trustee also asks the Court to approve a disbursement from f � '6 E"i O Cl) principal not to exceed $ 15,000 to the firm for payment of reasonable attorneys' fees and costs �§ c:: 0 � .g incurred by the trust in connection with the preparation of the account and the petition for s� [!'.! 'ti co c:: 5 ;g adjudication and for the presentation of the account at audit. This request is also approved. "' ro � � t::: ,2 �.!:; �� .:: c:: Upon confirmation of the fifth account, PNC Bank, N.A.1 trustee, is hereby discharged Cl) c:: ;g Cl) - c:: ::i 8 � OI �a§ and released from all liability with respect to the trust herein and the beneficiaries thereunder for �-� II I<: L. 5- its administration of the trust from April 7, 2014 to February 15, 2018, in accordance with this :E' e � 1ii " f! :6 U) adjudication. :,, 't:: :,, :::i s8 "') i:: - ::., .Cll �'t) c:: la Subject to the views expressed herein and to distributions heretofore properly made, the O Cl) �� i::: Cl) net ascertained balances of principal and income are awarded to the trustee for further =>& "'<:( � Q) ...0 ....0 :,. :S. administration . �� �§ r� l:: Cl:: .;) .. AND NOW, this '2. 1.� day of September, 2019, the fifth account is confirmed . c·� �� o� i� e, c:: A motion for reconsideration of this adjudication may be filed within twenty (20) days nj 13 �i from the entry hereof. An appeal from this adjudication may be taken to the appropriate �� (/) Cl) l'. iii appellate court within thirty (30) days from the entry of the adjudication. See, Pa.O.C. Rule 8.2 '1 � 0::, �-, o'b i� 16 e� s '- Cl) • ..... ..c:: :? )) .:: c: e- 0 Ill t�� 3 � .g 1977-X0448.105.3 Adjudication, Page 1 · and Montgomery County Local Rule 8.2A, and Pa. R.A.P. 902 and 903. BY THE COURT: / This adjudication efiled '1';./c,/J 9 Lewis R. Olshin, Esquire David Dembe, Sr. Deputy Attorney General Herbert B. Chadwick, prose 17