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HomeMy WebLinkAbout03-10-14 r IN RE: IN THE COURT OF COMMON PLEAS OF ESTATE OF LOTTIE IVY DIXON CUMBERLAND COUNTY, PENNSYLVANIA 21-07-0686 ORPHANS' COURT ORDER OF COURT AND NOW, this —V day of March, 2014 after review of the objections filed by George F. Dixon III and Richard E. Dixon to the First and Partial Account of the Trust Under Revocable Agreement with Lottie Ivy Dixon, we find that the objectors have standing with respect to two distributions listed as "Lottie I. Dixon — Distribution" in the amounts of$1,504,230.00 and $167,700.00 and, in accordance with the Rules, the court SUSTAINS the objections to these two entries in the accounting and refers the matter back to the Accountant, Manufacturers and Traders Trust Company to provide an explanation for the purpose of those two distributions. In all other respects, the objections are OVERRULED. By the Court, / �vf Albert H. Masland, Kimberly M. Colonna, Esquire 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108-1166 Kevin J. Kehner, Esquire Obermayer Rebmann Maxwell & Hippel LLP 200 Locust Street, Suite 400 Harrisburg, PA 17101 tA-�r y FR P-3 Mark D. Bradshaw, Esquire Stevens & Lee, P.C. - o n 17 North Second Street 16th Floor c Harrisburg, PA 17101 V � IN RE: IN THE COURT OF COMMON PLEAS OF ESTATE OF LOTTIE IVY DIXON CUMBERLAND COUNTY, PENNSYLVANIA 21-07-0686 ORPHANS' COURT IN RE: OPINION AND ORDER OF COURT Mastand, J., March 7, 2014:-- Background The Lottie Ivy Dixon Revocable Trust (the Trust) was established in 1985. From 1985 to 2007, George F. Dixon III and Richard E. Dixon (the Brothers) were remainder beneficiaries and M&T (or its predecessor) was the sole trustee. The Brothers became co-trustees in 2007 when their mother, Lottie Dixon, died. On June 26, 2013, M&T filed a first and partial account of the Trust without the signature of either of the Brothers. Before the court are multiple objections raised by the Brothers to M&T's account. The objections can be divided into two categories: objections relating to the management of the trust and objections relating to the format of the account. M&T filed a motion to strike the objections. Following briefing and argument thereon, we address not only the threshold issue of whether the Brothers have standing to object to the first and partial account, but also we address the merits of the majority of the objections. Discussion The only part of the Uniform Trust Code adopted in Pennsylvania that explicitly mentions standing is the Uniform Law Comment to the section dealing with remedies for breach of trust. See 20 PA. CONS. STAT.ANN. § 7781. A breach of trust is defined as "a violation by a trustee of a duty the trustee owes to a beneficiary." td. § 7781(a). Simply 21-07-0686 ORPHANS' COURT put, "[b]eneficiaries and cotrustees have standing to bring a petition to remedy a breach of trust." !d. at Uniform Law Comment. It is irrelevant if there are multiple trustees; one trustee can maintain a suit against another trustee, even if the suing trustee participated in the breach. See RESTATEMENT(SECOND) OF TRUSTS § 200 Comment (e) (1959) (explaining that "the suit is on behalf of the beneficiary"). The Brothers' objections are primarily based on how M&T allegedly mismanaged the trust in violation of their duty as trustee over the course of 22 years prior to Lottie Dixon's death. Therefore, the bulk of the objections relate to a breach of trust claim. Based on the express language of the Uniform Law Comment, as contingent remainder beneficiaries and cotrustees of the Trust, the Brothers have standing to bring a petition to remedy a breach of trust. See 20 PA. CONS. STAT.ANN. § 7781(a) (Uniform Law Comment). Although the Brothers have standing, their claims challenging M&T's actions while their mother was alive are without merit. In Pennsylvania, the law is clear that "[r]egardless of the legal capacity of the settior, the rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor while a trust is revocable." id. § 7753(a). As interpreted by the Joint State Government Commission of the Pennsylvania General Assembly in 2005, "[s]ubsection (a) places a revocable trust on the same footing as a will, under which no beneficial interest is effective until the testator's death." td. at JT. ST. GOVT. COMM. COMMENT-2005. The Trust was revocable until Lottie Dixon died in 2007. Therefore, as long as Lottie Dixon was alive, M&T only owed a duty as trustee to her and no other beneficial interest was effective until she died. Arguably, the Brothers were not true "beneficiaries" -2- 21-07-0686 ORPHANS' COURT until 2007. Furthermore, until 2007, the rights of the beneficiaries, including their right to file a breach of trust action, were subject to the control of Lottie. As such, Brothers' claims regarding the alleged mismanagement of the Trust while their mother was alive must fail.' Similarly, the Brothers' objection to M&T not requiring Lottie Dixon to request distributions in writing is irrelevant. "A trustee is not liable to a beneficiary for breach of trust if the beneficiary consented to the conduct constituting the breach." Id. § 7789. Additionally, "[a]n approval by the settlor of a revocable trust . . . binds all the beneficiaries." Id. at Uniform Law Comment. M&T claims that Lottie telephoned them requesting distributions from the Trust. This affirmative action is enough to show that she consented to M&T not requiring her to submit a written request. Furthermore, as settlor of a revocable trust, Lottie's consent binds all beneficiaries. Therefore, the Brothers' claims regarding M&T's failure to require Lottie to submit a written request for distributions are immaterial, because she clearly consented to M&T's behavior. It is possible that the Brothers also lack standing to raise this objection altogether. The Uniform Law Comment further explains that: [f]ollowing the death . . . of the settlor, the beneficiaries would have a right to maintain an action against a trustee for breach of trust. However, with respect to actions occurring prior to the settlor's death or incapacity, an action by the beneficiaries could be The following example illustrates the logic of this argument. Assume Mom writes a will in 1985 containing provisions for her two kids including a gift of a checking account containing $5 million. Mom dies in 2007. Even if the checking account only has$5 remaining in 2007, the kids cannot challenge what their mother did with the money from 1985 through 2007. Similarly, the kids cannot challenge changes made to the will from 1985 to 2007(other than claims of undue influence, fraud, duress, etc.). The reason is because the kids'beneficial interest was not effective until their Mom died. Their Mom was free to spend her money and change her will while she was alive. The same logic applies in this case. Lottie Dixon was free to spend her money in any way she wanted while she was alive and M&T had no duty to preserve her money for her children. -3- 21-07-0686 ORPHANS' COURT barred by the settlor's consent or by other events such as approval of the action by a successor trustee. Id. § 7753 (Uniform Law Comment) (emphasis added). There are two possible interpretations of this Comment. One interpretation is that if the settlor consents, the entire action by the beneficiaries is barred, meaning the beneficiaries lack standing to raise the claim to begin with. On the other hand, the Comment could simply mean that the beneficiaries still have standing to raise the claim but the claim must nevertheless fail if consent is proven. In either event, the claim fails. The Brothers' remaining objections relate to the contents of the actual account. Generally, accounts in trust matters are subject to the same rules as accounts in general estate matters. See id. § 7799.2. Any party in interest has standing to file a petition to review any part of the account. See id. § 3521. Therefore, the Brothers have standing to raise their claims regarding the actual format and contents of the account. Orphans' Court Rule 6.1(a) provides, in relevant part, that an account must specify "[t]he dates of all receipts, disbursements and distributions, the sources of the receipts, and the persons to whom disbursements and distributions are made and the purpose thereof shall be stated ..." (emphasis added). Here, there are two substantial distributions listed as "Lottie I. Dixon — Distribution" in the amounts of$1,504,230.00 and $167,700.00 with no explanation of the purpose of the distributions. In accordance with the Rules, the court will sustain the Brothers' objections to these two entries in the accounting and refer the matter back to M&T to provide an explanation for the purpose of those two distributions. Following this minor correction, the accounting may be confirmed without the appointment of an auditor. -4- 21-07-0686 ORPHANS' COURT Postscript The court believed that this matter had been resolved with our order of December 28, 2012, and assumed (after no appeals were filed) that the parties had reached an armistice with respect to their war to end all wars. Although we are compelled at present to permit the Brothers to proceed, we do so with the admonition that we will not permit this engagement to rise to the level of a second world war— a battle over the same borders is not legally tenable. Thus, we cite the introduction of the preeminent World War I novel, wherein the author, observed that his story "will try simply to tell of a generation of men who, even though they may have escaped shells, were destroyed by the war.i2 Although the parties are standing, they have not escaped the shells. Before they are utterly decimated, we enter the following: ORDER OF COURT AND NOW, this—V day of March, 2014 after review of the objections filed by George F. Dixon III and Richard E. Dixon to the First and Partial Account of the Trust Under Revocable Agreement with Lottie Ivy Dixon, we find that the objectors have standing with respect to two distributions listed as "Lottie I. Dixon — Distribution" in the amounts of$1,504,230.00 and $167,700.00 and, in accordance with the Rules, the court SUSTAINS the objections to these two entries in the accounting and refers the matter back to the Accountant, Manufacturers and Traders Trust Company to provide 2 Erich Maria Remarque, All Quiet an the Western Front(1 at ed. 1929). -5- 21-07-0686 ORPHANS' COURT an explanation for the purpose of those two distributions. In all other respects, the objections are OVERRULED. By the Court, Albert H. Masland, J. Kimberly M. Colonna, Esquire 100 Pine Street P.O. Box 1166 Harrisburg, PA 17108-1166 Kevin J. Kehner, Esquire Obermayer Rebmann Maxwell & Hippel LLP 200 Locust Street, Suite 400 Harrisburg, PA 17101 Mark D. Bradshaw, Esquire Stevens & Lee, P.C. 17 North Second Street 16th Floor Harrisburg, PA 17101 Daniel L. Sullivan, Esquire 26 W. High Street Carlisle, PA 17013 Charlotte Ivy Dixon 323 Bayview Street Camden, ME 04843 -6- ORPHANS' COURT DIVISION COURT OF COMMON PLEAS OF In Re: LOT,IE IVY DIXON CUMBERLAND COUNTY PENNSYLVANIA NO. 21-07-0686 CERTIFICATE OF SERVICE OF ORDER ORDER DATE: 03/10/14 JUDGE'S INITIALS: AHM TIME STAMP DATE: 03/10/14 IN RE: ORDER OF COURT WITH OPINION AND ORDER OF COURT ATTACHED ............................................................... SERVICE TO: KIMBERLY COLONNA, 100 PINE STREET,PO BOX 1166 HARRISBURG PA 17108-1166 KEVIN J KEHNER, 200 LOCUST STREET SUITE 400.HARRISBURG PA 17101 MARK BRADSHAW, 17 N SECOND STREET, 16TH FLOOR HARRISBURG PA 17101 METHOD OF MAILING: ENVELOPES PROVIDED BY: ® USPS ❑ PETITIONER ❑ RRR ® JUDGE ❑ HAND DELIVERED ❑ CLERK OF ORPHANS COURT ❑ OTHER MAILED: 03/10/2014 SERVICE TO: DANIEL SULLIVAN,26 W HIGH STREET,CARLISLE PA 17013 CHARLOTE IVY DIXON,323 BAYVIEW STREET,CAMDEN ME 04843 METHOD OF MAILING: ENVELOPES'PROVIDED BY: ® USPS ❑ PETITIONER ❑ RRR ® JUDGE ❑ HAND DELIVERED ❑ CLERK OF ORPHANS COURT ❑ OTHER MAILED: 03/10/2014 ` eputy C]erkofOrpha ' Court