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HomeMy WebLinkAbout00-51 Orphans'IN RE: ESTATE OF MILDRED M. GERHARDT, Deceased, late of the Township of North Middleton, Cumberland County, Pennsylvania IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA ORPHANS' COURT DIVISION NO. 21-00-51 IN RE: MOTION TO DISMISS BEFORE HOFFER. P.J. AND HESS, J. OPINION AND ORDER Mildred M. Gerhardt (Settlor) died on May 18, 2002. Under the Settlor's will, Manufacturers and Traders Company, as successor in interest to Farmers Trust Company, is the trustee. The terms of the Trust under the Gerhardt Will are set forth in paragraphs 4(d) and (e) of the will: All the rest, residue and remainder of my estate I give unto FARMERS TRUST COMPANY, Carlisle, Pa., which shall hold the same in trust for the use and benefit of my friend, RICHARD HARRY STICKEL, for the term of his natural life. My said Trustee shall apply so much of the income as shall be necessary for the support, maintenance, and care of said beneficiary, and I also grant unto my said Trustee the discretion as to whether or not any invasion of the principal shall be made for such purpose, taking into account other funds and sources of income of said beneficiary. Upon the death of RICHARD HARRY STICKEL, I give the share of the principal of the said trust then remaining, together with any unexpended income, in equal shares, to my nieces, RITA ELLEN GERHARDT BURGETT and GENE ANNE GERHARDT BOYD, absolutely. 21-00-51 ORPHANS' COURT On March 21, 2003, the trustee filed a First and Final Account and Schedule of Proposed Distribution. (Mot. at para. 2). The First and Final Account sets forth that two distributions of accrued income in the amounts of $2,200.97 and $1,117.35 were made by the trustee to Richard Harry Stickel. The trustee proposes to distribute $14,265.12 to Mr. Stickel's estate as income accumulated prior to his death on July 6, 2002. This reflects the amount of income payments which were suspended when the remainder beneficiaries initially objected to the distribution of any income. The trustee proposes to distribute the entirety of the principal of the trust, amounting to $278,255.72 to the objectants. Objections were filed to the proposed income distributions to Mr. Stickel on the ground that other funds and sources of income made the income distributions to him "unnecessary" for his support, maintenance and care. The trustee has filed a motion to dismiss the objections to trustee's First and Final Account alleging that, as a matter of law, objectants have failed to articulate grounds for relief. In reviewing a motion to dismiss, the court must accept as true all well pleaded statements of fact of the party against whom the motion is made and consider against him only those facts that he admits. Weik v. Estate of Brown, 794 A.2d 907 (Pa. Super. 2002). The court should affirm the grant of such a motion to dismiss when the moving party's right to succeed is certain and so free from doubt that proceeding before a finder of fact would be useless. Id. The trustee claims that it properly distributed, and properly proposed to distribute, income to Mr. Stickel even though he had resources of his own. We agree. 2 21-00-51 ORPHANS' COURT "Where discretion is conferred upon the trustee with respect to the exercise of power, it is not subject to control by the court, except to prevent an abuse by the trustee of his discretion." Geron v. Kennedy, 112 A.2d 181 (Pa. 1955). Objectants argue that the trustee abused its discretion when it did not take into account other funds and sources of income of the beneficiary. This argument ignores the fact that the terms of the trust only require such action in the case of principal distribution. My said Trustee shall apply so much of the income as shall be necessary for the support, maintenance and care of said beneficiary, and I also grant unto my said Trustee the discretion as to whether or not any invasion of the principal shall be made for such purpose, taking into account other funds and sources of income of said beneficiary. (Emphasis added.) Paragraph 4(e) of the Will. Settlor's Will clearly states that the trustee must take into account other funds and sources of income of the beneficiary only when there is an invasion of the principal. There was no invasion of the principal in this case. Instead, the trustee distributed only income to Mr. Stickel. In the end, the total income distributed to Mr. Stickel will be little more than $17,000 over a period of approximately two years. This can hardly be said to be a lavish distribution and it reflects only a small percentage of the considerable sum which will be paid to the objectants in this case. Because there was no invasion of principal, we must determine if the income distributed to Mr. Stickel was "necessary for the support, maintenance, and care of the said 3 21-00-51 ORPHANS' COURT beneficiary" as those words have been defined by our courts. In Stuckey Estate, 40 D & C.2d 436, 440 (Dauphin Co. Orphans' Ct. 1966), the court concluded that "necessities do not include merely the bare necessities of life and exclude all other articles or services that might reasonably promote" comfort. Id. In Sahlin Estate, 13 Fid. Rep.2d 224 (Chester Co. Orphans' Ct. 1993), a case factually similar to the matter sub judice, the court held that the trustee did not abuse its discretion in distributing the principal to the life beneficiary even though she had a substantial estate of her own. The court concluded that "necessary" did not mean "financially necessary," but, rather what the beneficiary reasonably needs to live. The objectants cite the case of Estate of Tashjian, 544 A.2d 67 (Pa. Super. 1988) in support of their argument. The facts in Tashjian are fundamentally different from our case. There, the Court of Common Pleas of Delaware County had held that a trustee could consider independent financial resources of a beneficiary when determining whether to invade the principal of a trust. As noted by the Superior Court: The question of whether a trustee should consider the independent resources of a trust beneficiary has been frequently litigated in Pennsylvania and in other jurisdictions .... In the majority of cases, Pennsylvania courts have concluded that by establishing a testamentary trust, the testator intended to relieve the beneficiary of the need to pay for living expenses out of her own funds .... In Demitz' Estate, 208 A.2d 280, 282 (Pa. 1965), the Pennsylvania. Supreme Court summarized the case law on this subject by stating that: Where a trustee has been given discretionary power to invade principal, the general rule is that 4 21-00-51 ORPHANS' COURT the existence of an independent estate by a wife is not sufficient justification for a Trustee's refusal to pay principal for her maintenance and support. Thus, in the absence of evidence of a contrary intent, an ambiguous trust provision should ordinarily be viewed as authorizing the invasion of trust principal even where the beneficiary has access to substantial income from other sources. Despite the foregoing language, the Superior Court concluded that the Delaware County court had not erred when it authorized the trustee to take into consideration the independent financial resources of the beneficiary in determining whether to invade the corpus of the trust fund established, in part, for her support and maintenance. It differentiated the case from those citing the general rule, referenced above, for the following reasons: First, the testator specifically provided that "[M]y Trustee may expend such amounts of principal as my Trustee, in her sole discretion, determines necessary for the support and maintenance of my said wife." (emphasis added). This reference to the trustee's sole discretion with respect to the principal is particularly striking when contrasted with the testator's general statement that "... my Trustee shall pay the net income [of the trust] to my said wife .... "The use of an adjective which emphasizes the especially broad or exclusive nature of a trustee's discretion is evidence that the trustee was granted authority to withhold trust funds from a beneficiary with independent resources. In Lang, the Court emphasized the "complete discretion" conferred upon the trustee by the trust instrument. 515 Pa. at 442, 428 A.2d at 1343. The Court also cited with approval two cases from other jurisdictions in which the trustee's decision to consider the beneficiary's resources was approved on account of the 21-00-51 ORPHANS' COURT "absolute discretion" afforded by the terms of the trust. 515 Pa. at 444, 528 A.2d at 1344 (citing ~luchincloss v. City Bank Farmers Trwst Co., 136 Conn. 266, 70 A.2d 105 (1949) and In re Watson's Will, 286 A.D. 950, 142 N.Y.S.2d 731 (1955)). In the instant case, the will entrusted the trustee with considerable discretion as to the distribution of the trust principal. Since the trustee refused to recommend invasion of the principal, and since the trustee asked the trial court to decide the question, we are reluctant to disturb the trial court' s determination. Furthermore, as in the Lang case, "[t]he circumstances surrounding the execution of the [the trust] instrument point strongly to testator's intent to have his trustee consider other resources." 515 Pa. at 443,528 A.2d at 1343. At the time the will was written, testator's widow was seventy-seven years old and could not speak English. Mr. Ackerman, the scrivener of the will, testified that he had known the testator and his wife for twenty-five years, that they had lived in a frugal manner, and that Mrs. Tashj ian had no experience handling substantial sums of money. Mr. Ackerman also testified that the testator distrusted his son Jack, whom he disinherited, and that the testator had repeatedly expressed concern that Jack might steal money from Mrs. Tashjian. Finally, Mr. Ackerman noted that he had informed the testator that in addition to any bequest received under the will, and in addition to Social Security benefits, Mrs. Tashjian had a survivorship interest in all property which the couple owned by the entireties; this included bank certificates as well as unencumbered real estate which could be rented to a commercial establishment. This testimony indicates that the testator intended that the trust corpus would serve as a reserve for the widow in the event that 6 21-00-51 ORPHANS' COURT the income from other sources proved inadequate to met her needs. In this case, discretion was not given to the trustee in the distribution of income. Discretion was granted to the trustee only with respect to the invasion of principal. The Tashjian case does, indeed, stand for the proposition that a trustee may, in certain circumstances, consider the independent financial resources of a beneficiary prior to invading principal. We are satisfied, however, that absent authority or a direction to the contrary, the trustee has no such duty with regard to the payment of income. ORDER AND NOW, this day of September, 2003, for the foregoing reasons, the motion of the trustee, Manufacturers and Traders Company, as successor in interest to Farmers Trust Company, to dismiss objections to the trustee's First and Final Account is GRANTED and said objections are DISMISSED. BY THE COURT, Wayne Shade, Esquire For the Objectors Richard C. Snelbaker, Esquire For the Respondent Mark A. Denlinger, Esquire For Trustee M & T Bank :rlm Kevin A. Hess, J. 7 IN RE: ESTATE OF MILDRED M. GERHARDT, Deceased, late of the Township of North Middleton, Cumberland County, Pennsylvania AND NOW, this IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA ORPHANS' COURT DIVISION NO. 21-00-51 IN RE: MOTION TO DISMISS BEFORE HOFFER. P.J. AND HESS, J. ORDER day of September, 2003, for the foregoing reasons, the motion of the trustee, Manufacturers and Traders Company, as successor in interest to Farmers Trust Company, to dismiss objections to the trustee's First and Final Account is GRANTED and said objections are DISMISSED. BY THE COURT, Wayne Shade, Esquire For the Objectors Richard C. Snelbaker, Esquire For the Respondent Mark A. Denlinger, Esquire For Trustee M & T Bank :rlm Kevin A. Hess, J.