Court Opinion

ID: 9695612
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:25:19.345306+00
Date Added: 2024-06-11T18:20:14.959503
License: Public Domain

*475CIRILLO, President Judge,
concurring:
While I agree with the result reached by the majority, I believe that the central issue of the transferability of the res was not adequately addressed. Since this goes directly to the validity of the trust, and hence the holding of the case, I write separately.
Clemens, the settlor and trustee, argues that, because the stock was “restricted” when the trust document was executed, it could not be the subject of a trust. He also asserts that the subject matter was not sufficiently identifiable. For these reasons Clemens argues that no trust was created. Alternatively, he argues both parol revocation and laches, saying that any rights DiLueia may have had were released by him as part of a 1976 settlement and, if they were not, DiLueia has waited too long to assert them. DiLueia, as beneficiary of the trust, argues that Clemens has not yet discharged his fiduciary duty under the agreement, that Clemens produced no evidence of prejudice resulting from DiLucia’s delay in enforcing his rights under the trust and that, contrary to the chancellor’s findings, the claimed release was not proven. There is no dispute between the parties that there was an intention to create a trust. Because I am in agreement with the majority that the chancellor erred in finding a contract rather than a trust, with its discussion of the identification issue and with its holding concerning the defenses raised by appellee, I will confine my discussion to the transferability of the res.
The majority notes that, because the settlor and trustee were the same person, no transfer was required. While this is true, whether or not a transfer was required is clearly a distinct issue from whether or not the res was capable of being transferred. Therefore, I cannot agree with the majority’s conclusion that, because a transfer was not required under the facts of this case, it is unnecessary to address the transferability of the shares in question. Transferability of the subject matter is one of the requisites of a valid trust. Restatement (Second) of Trusts § 79 (1959).
*476The law will not presume an obligation to give away one’s property. It is, therefore, axiomatic that the burden of proving an alleged trust is on the party asserting its existence. However, where there is a written, executed declaration of trust which is authenticated according to the rules of evidence and which contains, on its face, the necessary elements of a trust, this burden has been met. The burden of defeating an authenticated, facially sufficient trust document must fall to him who challenges its validity. See First Federal v. Great Northern, 282 Pa.Super. 337, 422 A.2d 1145 (1980) (writing is sufficient evidence of trust if beneficiary, trust property, and purposes of trust are set forth). The writing speaks for itself and, in this case, there is nothing on the face of the declaration of trust which mandates a finding of invalidity. Therefore, if the beneficiary’s rights under the trust are to be denied enforcement, Clemens must have shown that, for reasons not evident within the document, the trust was fatally flawed.
The subject matter of the trust sub judice was 2,000 shares of Unicom, Inc.’s stock, legal title to which remained with the settlor. Clemens testified that he could not transfer the stock to DiLucia outright because it was “restricted.” He therefore executed the declaration of trust he now challenges for that very reason. As the majority noted, however, there was no evidence as to the nature of this restriction. The record supports an inference that it was legal title which could not be transferred; the evidence did not show that the beneficial interest was inalienable nor that Clemens’ rights in the stock would be forfeited upon his attempt to transfer any interest in it. Absent evidence of this sort, Clemens could not prove that neither the legal nor the equitable interest in the stock was nontransferable. In. fact, the declaration of trust acknowledged that DiLucia, who had furnished consideration, was the equitable owner of the stock. This recital that DiLucia was the equitable owner is an admission by Clemens that the beneficial interest in the stock had already been transferred, and therefore, that at least that portion of the stock was transferable. 1 G. Henry, Pennsylvania Evidence § 91 (1953).
*477Clemens’ inability to title the stock in either DiLucia’s name, or in his own name as trustee, did not make the stock unsuitable subject matter for a trust. Restatement (Second) of Trusts § 80, which delineates an exception to Section 79 (property which the owner cannot transfer cannot be held in trust), states:
If property is not transferable for a reason applicable only to the transfer of the legal title to the property, it can be held in trust.
Comment (a) to the above section explains:
If the reason why certain property is not transferable is applicable only to the legal title to the property and not to the beneficial interest, the owner of such property can effectively declare himself trustee of the property, although he cannot transfer the property in trust.
A review of the record shows that Clemens did not prove his allegation that the trust failed because the res was not transferable. The equitable ownership having already been transferred at the time of the creation of the trust, Clemens’ argument that his inability to transfer legal title prevented the trust from coming into existence is of no avail. It is clear that limited interests in property may be held in trust. Restatement (Second) of Trusts § 77 (1959). In this case, it was the legal ownership of the stock which was held in trust. The declaration of trust supports this conclusion by referring to DiLucia as the equitable owner of the stock and by imposing the duty to transfer legal title at the end of its term. I agree with the majority that a valid trust was created.
I would also note the law’s view of a trustee who challenges a trust under which he has accepted duties:
It is the duty of a trustee to support the trust and not to aid in any way in attacking or undermining it____ It is a fundamental principle never to be departed from, and is as binding as any axiom of the common law, that he who takes upon himself a trust, takes it for the benefit of him for whom he is entrusted, and will not be permitted to set up the invalidity of the act of its creation.
*478Carter v. Carter, 321 Pa. 391, 396, 184 A. 78, 80 (1936). Accord In re Briggs’ Estate, 150 Pa.Super. 66, 27 A.2d 430 (1942) (“It is a complete answer to [trustees contention that creation of trust was invalid] that the trustees are not in a position to make it.”). I believe this applies with special force to a trustee who is also the settlor. Clemens was in a position of superior knowledge with regard to the stock and any applicable restrictions. DiLucia was justified in relying on Clemens’ representation, as evidenced by the wording in, and execution of, the trust document, that Clemens could transfer the equitable interest to him and that legal title would be transferred in the future. As the settlor of the trust, Clemens is equitably estopped from asserting its invalidity in an attempt to avoid fulfilling the obligation he assumed under its terms.
That this duty could not have been discharged at the end of the three years specified in the 1968 declaration of trust does not help Clemens’ argument. While a trustee has no duty to comply with a term of the trust which is impossible of performance, if this impossibility is temporary, the trustee is under a duty to comply after the impossibility has been removed. Restatement (Second) of Trusts § 165(1), comment c (1959). At the time of the creation of the trust, Clemens evidently expected that he would be able to transfer legal title later; the fact that he erred in estimating he would be able to do so in three years is not fatal to the trust and does not work to the detriment of the beneficiary. Even though in 1971 he could not have titled the stock in DiLucia’s name, Clemens should have distributed the stock to DiLucia in 1972 when the stock began to be publicly traded. Failure to do so constituted a breach of trust.
Further, Clemens’ argument that “it was incumbent on [DiLucia] to insure that the shares were transferred in 1971” is incorrect. The burden of administering the trust according to its terms is on the trustee. Restatement (Second) of Trusts § 169 (1959). DiLucia’s failure to immediately demand performance by the trustee or to immediately bring an action in equity did not relieve the trustee of his *479obligation. Until he makes distribution of the res, Clemens remains in his fiduciary capacity with regard to DiLucia. A trustee’s duty continues until the trust is finally terminated by distribution of the trust property. In re Thaw’s Estate, 163 Pa.Super. 484, 63 A.2d 417 (1949). See also Swoboda v. U.S., 69 T.C. 500, aff'd 258 F.2d 848 (1958). Because we find that Clemens did not show prejudice as a result of DiLucia’s delay in bringing this action, Clemens’ duty to transfer legal title to DiLucia is still extant.
For the foregoing reasons, I concur in the result reached by the majority.