Court Opinion

ID: 4153372
Source: CourtListenerOpinion
Date Created: 2017-03-16 17:13:21.973097+00
Date Added: 2024-06-11T14:34:06.432423
License: Public Domain

J. A19041/16

NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37

TRUST OF JOHN MIDDLETON, INC.            :     IN THE SUPERIOR COURT OF
                                         :           PENNSYLVANIA
                                         :
APPEAL OF: JOHN S. MIDDLETON             :          No. 3389 EDA 2015

                 Appeal from the Order Entered October 6, 2015,
              in the Court of Common Pleas of Montgomery County
                   Orphans’ Court Division at No. 2014-X3827

BEFORE: FORD ELLIOTT, P.J.E., OTT AND DUBOW, JJ.

MEMORANDUM BY FORD ELLIOTT, P.J.E.:                  FILED MARCH 16, 2017

      John S. Middleton, Trustee of the Trust of John Middleton, Inc., dated

May 19, 1982 (“1982 Trust”), appeals the order of the Court of Common

Pleas of Montgomery County that granted the motion for summary judgment

of Anna K. Nupson (“Nupson”) and granted the request for a declaration that

Nupson’s 1998 assignment of her interest in the 1982 Trust has been

revoked and is a nullity and that Nupson is a beneficiary entitled to one-third

of the remainder of the 1982 Trust outright.

      Herbert H. Middleton, Jr., created the 1982 Trust in the name of

John Middleton, Inc., as settlor.     The trial court summarized the facts

concerning the 1982 Trust as well as the procedural history relating to this

litigation:

                    During her lifetime, Frances S. Middleton was
              the sole income beneficiary of the 1982 Trust.
              Following her death on September 24, 2013, under
              the provisions of the trust instrument, the remaining
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          assets became distributable outright in equal shares
          to the three children of Frances S. Middleton and
          Herbert H. Middleton, Jr.: [Nupson], [appellant]),
          and Lucia Hughes (“Ms. Hughes”). [Appellant] and
          his mother, Frances, initially served as co-trustees of
          the 1982 Trust. [Appellant] now serves as the sole
          trustee of the trust.

                 The 1982 Trust contains a spendthrift provision
          that prohibits assignment of a beneficiary’s interest
          in the Trust. On June 15, 1998, [Nupson] signed a
          document with a caption of “Agreement of Trust of
          Anna K. Middleton dated September 12, 1994” titled
          “Assignment” (the “1998 Assignment”) which
          purported to assign irrevocably all principal
          distributions from the 1982 Trust otherwise payable
          to [Nupson] to a trust she created on September 12,
          1994 (the “1994 Anna Trust”), of which she is the
          settlor and lifetime beneficiary.[Footnote 1] The
          1998 Assignment provides:

                I hereby irrevocably assign all principal
                distributions that would otherwise be
                payable to me from the 1972 Trust, the
                1982 Trust and the 1990 Trust to the
                1994 Trust, and I hereby renounce my
                right to serve as a Co-Trustee of the
                1972 Trust.

                 It is undisputed that [appellant], trustee of the
          1982 Trust, has never made any distribution of
          principal of the 1982 Trust to any of the remainder
          beneficiaries, and specifically has not made any
          distribution pursuant to the 1998 Assignment.

                 By letters dated September 25, 2014 and
          October 3, 2014 to [appellant], trustee of the
          1982 Trust and one of the trustees of the 1994 Anna
          Trust, [Nupson] explicitly revoked and repudiated
          the 1998 Assignment and requested immediate
          distribution of principal from the 1982 Trust. In her
          September 25, 2014 letter, [Nupson] wrote:

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               By this letter, I immediately revoke and
               repudiate any and all assignments of
               principal or income that I may previously
               have authorized you to make as Trustee
               of any trust that benefits me, or that I
               may have authorized your successor
               trustees to make. This revocation and
               repudiation of all such assignments
               specifically includes but is not limited to
               the attached “Agreement of Trust of
               Anna K. Middleton dated September 12,
               1994,” but with a signature dated
               June 15, 1998.

               I also repeat my request of last month
               that you distribute principal to me under
               three spendthrift trusts which you
               administer as Trustee, and of which I am
               a beneficiary.     To be clear, I have
               requested immediate distributions of
               principal from the 1972 Herbert H.
               Middleton, Sr. Trust, the 1982 John
               Middleton, Inc. Trust, and a distribution
               from the 1990 Herbert H. Middleton, Jr.
               Trust on September 16, 2018, pursuant
               to the provisions of those three trusts.

               [Nupson] repeated        her   request   in   an
          October 3, 2014 letter:

               By my letter of September 25, 2014, I
               immediately revoked and repudiated any
               and all assignments of principal or
               income that I may previously have made
               or authorized you to make. I informed
               you that this revocation and repudiation
               of all such assignments specifically
               includes but is not limited to the
               so-called “Agreement of Trust of Anna K.
               Middleton dated September 12, 1994,”
               but which has a signature dated June 15,
               1998. I am reiterating that revocation
               and repudiation in this letter, and wish to
               clarify   that   by      my      letter  of

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                September 25, 2014 and again by this
                letter, I revoke your authority to
                distribute funds by any other manner
                than that expressly provided in the three
                spendthrift trusts discussed below.

                ....

                I also write to repeat my request of last
                month that you distribute principal to me
                from the three spendthrift trusts which
                you administer as Trustee, and of which I
                am a beneficiary. To be clear, I have
                requested immediate distributions of
                principal from the 1972 Herbert H.
                Middleton, Sr. Trust and the 1982 John
                Middleton, Inc. Trust, and a distribution
                from the 1990 Herbert H. Middleton, Jr.
                Trust on September 16, 2018, pursuant
                to the respective provisions of those
                trusts.

                [Nupson] filed a Petition for Declaratory Relief
          with respect to which she has now filed a motion for
          summary judgment presenting the following issue:
          whether [Nupson’s] 1998 assignment of her interest
          in the 1982 Trust, later revoked in writing, is valid
          and enforceable where the 1982 Trust contained a
          spendthrift provision prohibiting assignment of a
          beneficiary’s interest, and where the trust assets
          have not yet been distributed. Responses to the
          motion were filed by [appellant] in his capacity as
          one of the trustees of the Trusts under Agreement of
          Trust    of   Anna    M.    Bauer,   Settlor,   dated
          September 12, 1994, and by Lucia Hughes and her
          children (“the Hughes family”). Ms. Hughes is one of
          three remainder beneficiaries of the 1982 Trust and
          her children are contingent remainder beneficiaries
          of the 1994 Anna Trust. . . . This Court has
          considered the arguments advanced in memoranda
          of law and at oral argument.

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            [Footnote 1] The 1998 Assignment also purports to
            assign to the 1994 Anna Trust all principal
            distributions otherwise payable to Ms. Nupson from
            an Agreement of Trust dated April 21, 1972, created
            by Herbert H. Middleton, Sr. and Anna E. Middleton
            (the “1972 Trust”) and an Agreement of Trust dated
            April 18, 1990, created by Herbert H. Middleton, Jr.
            and Frances S. Middleton (the “1990 Trust”). This
            Order and Opinion applies only to the 1982 Trust as
            no motions have been filed with respect to the other
            trusts to which the 1998 Assignment purportedly
            applies.

Trial court opinion, 10/2/15 at 1-4.

      By order dated October 2, 2015, the trial court granted the motion for

summary judgment which is on appeal before this court. The trial court also

stated in the order that because there were outstanding objections to the

Trust account, the trial court was unable to issue an adjudication of the

account.

      On appeal, appellant raises the following issues for this court’s review:

            1.    Did the [trial] [c]ourt err as a matter of law in
                  granting summary judgment on the affirmative
                  defenses of laches, equitable estoppel, unclean
                  hands and unjust enrichment, despite the fact
                  that no discovery had taken place regarding
                  [Nupson’s] Assignment, her ratification and her
                  unexplained 16-year delay in revoking it?

            2.    Did the [trial] [c]ourt err as a matter of law in
                  its interpretation of 20 Pa. C.S.A. § 7746(a),
                  which changed the common law rule and
                  limited spendthrift trust protection to only a
                  “reasonable time” after the termination of a
                  trust, and which is necessarily dependent upon
                  facts    and    circumstances    and   therefore
                  inappropriate for summary judgment?

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Appellant’s brief at 5.

      This court reviews a grant of summary judgment under the following

well-settled standards:

                   Pennsylvania law provides that summary
                   judgment may be granted only in those
                   cases in which the record clearly shows
                   that no genuine issues of material fact
                   exist and that the moving party is
                   entitled to judgment as a matter of law.
                   The moving party has the burden of
                   proving that no genuine issues of
                   material fact exist.       In determining
                   whether to grant summary judgment,
                   the trial court must view the record in
                   the light most favorable to the
                   non-moving party and must resolve all
                   doubts as to the existence of a genuine
                   issue of material fact against the moving
                   party.     Thus, summary judgment is
                   proper only when the uncontraverted
                   [sic] allegations in the pleadings,
                   depositions, answers to interrogatories,
                   admissions of record, and submitted
                   affidavits demonstrate that no genuine
                   issue of material fact exists, and that the
                   moving party is entitled to judgment as a
                   matter of law. In sum, only when the
                   facts are so clear that reasonable minds
                   cannot differ, may a trial court properly
                   enter summary judgment.

                   [O]n appeal from a grant of summary
                   judgment, we must examine the record
                   in a light most favorable to the
                   non-moving party.       With regard to
                   questions of law, an appellate court’s
                   scope of review is plenary. The Superior
                   Court will reverse a grant of summary
                   judgment only if the trial court has
                   committed an error of law or abused its

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                    discretion.    Judicial discretion requires
                    action in conformity with law based on
                    the facts and circumstances before the
                    trial    court     after    hearing    and
                    consideration.

            Gutteridge [v. A.P. Green Services, Inc., 804
A.2d 650, 651 (Pa.Super. 2002)].

Wright v. Allied Signal, Inc., 963 A.2d 511, 514 (Pa.Super. 2008)

(citation omitted).

      Pennsylvania Rule of Civil Procedure 1035.2 provides:

            After the relevant pleadings are closed, but within
            such time as not to unreasonably delay trial, any
            party may move for summary judgment in whole or
            in part as a matter of law

            (1)     whenever there is no genuine issue of
                    any material fact as to a necessary
                    element of the cause of action or defense
                    which could be established by additional
                    discovery or expert report, or

            (2)     if, after the completion of discovery
                    relevant to the motion, including the
                    production of expert reports, an adverse
                    party who will bear the burden of proof
                    at trial has failed to produce evidence of
                    facts essential to the cause of action or
                    defense which in a jury trial would
                    require the issues to be submitted to a
                    jury.

Pa.R.C.P. 1035.2.

      Appellant argues that Nupson’s assignment of her interest in the

1982 Trust was part of a Family Settlement Agreement and a Master

Settlement Agreement created and agreed to following the death of

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Herbert H.   Middleton,   Jr.     These    agreements,    appellant    asserts,

demonstrated that Mrs. Middleton’s decision to include Nupson equally in her

estate plan upon her death was dependent upon Nupson warranting that the

Assignment was irrevocable, that the assets from the 1982 Trust would be

added to the principal of the 1994 Trust, and that the assignment would

further the family’s objective that family assets would only pass to family

members. Under the terms of the 1994 Trust, the assets in the 1994 Trust

could, upon the death of Nupson, pass only to Nupson’s issue or to her

nieces and nephews if she had no issue. When Nupson retained new counsel

in 2011 and reviewed the various trust documents including the 1994 Trust

and the assignment, Nupson did not revoke the assignment. According to

appellant, Nupson did not revoke the assignment at that time because then

Mrs. Middleton would have disinherited her.         Instead, appellant adds,

Nupson intentionally and deceitfully waited until after Mrs. Middleton’s estate

plan was made final by her death. Appellant further asserts that discovery is

needed surrounding the family agreements, Nupson’s investigation, the

terms of the revocation of the assignment, and Nupson’s opposition to the

filing of an account.

      In granting summary judgment, the trial court determined that there

were four undisputed facts relevant to the 1998 assignment:            1) the

1982 Trust contained a spendthrift provision that specifically prohibited

assignments; 2) Nupson signed a document in 1998 in which she intended

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to assign her interest in the 1982 Trust; 3) Nupson signed letters dated

September 14, 2014 and October 3, 2014 that revoked the assignment; and

4) appellant never acted on the assignment and did not distribute the trust

assets to the remainder beneficiaries.

      Section 7742 of the Uniform Trust Act provides:

            (a)   Validity.--A spendthrift provision is valid only
                  if it restrains both voluntary and involuntary
                  transfer of a beneficiary's interest.

            (b)   Creation.--A trust instrument providing that
                  the interest of a beneficiary is held subject to a
                  “spendthrift trust,” or words of similar import,
                  is sufficient to restrain both voluntary and
                  involuntary transfer of the beneficiary's
                  interest.

            (c)   Effect.--A beneficiary may not transfer an
                  interest in a trust in violation of a valid
                  spendthrift provision.    Except as otherwise
                  provided in this subchapter, a creditor or
                  assignee of the beneficiary of a spendthrift
                  trust may not reach the interest or a
                  distribution by the trustee before its receipt by
                  the beneficiary.

20 Pa.C.S.A. § 7742.

      Paragraph FOURTH of the 1982 Trust contains language that restricts

assignments:

            All interests hereunder, whether principal or income,
            while undistributed and in the possession of
            Trustees, and even though vested or distributable,
            shall not be subject to attachment, execution, or
            sequestration for any debt, contract, obligation or
            liability of any beneficiary, and furthermore, shall not
            be subject to pledge, assignment, conveyance or
            anticipation.

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Agreement of Trust between John Middleton, Inc., and Frances S. Middleton

and John S. Middleton, 5/19/82 at 6, ¶ 4.

      Appellant does not dispute that this provision is a spendthrift

provision.

      The trial court determined:

                   A valid spendthrift provision makes it
             impossible for a beneficiary to make a legally
             binding, irrevocable transfer because “an irrevocable
             assignment would be equivalent to a transfer of the
             beneficiary’s interest.” In re Keeler’s Estate, 334
Pa. 225, 232, 3 A.2d 413, 417 (Pa. 1939) (quoting
             Griswold on Spendthrift Trusts, section 306).
             Although a trustee may choose to honor the
             beneficiary’s purported assignment, because the
             beneficiary has not made a binding transfer, the
             beneficiary can withdraw his or her direction as to
             future distributions. 20 Pa.C.S. § 7742(c) (Uniform
             Law Comment, citing Restatement (Third) of Trusts
             Section 58 cmt. d (Tentative Draft No. 2, approved
             1999); Restatement (Second) of Trusts Section 152
             cmt. i (1959).

             ....

             . . . . While a trustee may honor an assignment, the
             assignment is invalid and can be revoked at any
             time.

                   In In re Keeler’s Estate, the Supreme Court
             of Pennsylvania decided as follows:

                    Even    in   a   spendthrift   trust  the
                    beneficiary has full ownership and control
                    of the installments of income after they
                    respectively accrue and therefore after
                    such accrual the beneficiary may give
                    directions to the trustee to pay such
                    installments to her nominee or assignee.

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                  When a beneficiary makes an assignment
                  of future income and directs the trustee
                  to pay such income to the assignee, such
                  an assignment, in the case of spendthrift
                  trusts, is invalid in the sense that it can
                  be revoked at any time by the
                  beneficiary, but, unless and until so
                  repudiated,     it   constitutes  a    valid
                  authority to the trustee to make
                  payments      of    successively  accruing
                  installments of income to the assignee.
                  The direction of the trustee to pay the
                  assignee is enforceable only as to each
                  installment after it accrues and then only
                  if the direction has not previously been
                  rescinded.

            In re Keeler’s Estate, supra, 334 Pa. 225, 231, 3
A.2d 413, 416 (Pa. 1939).

                  Applying the Supreme Court’s reasoning in
            In re Keeler’s Estate to the present case, the 1998
            Assignment is not irrevocable. Indeed it could be
            revoked at any time. Accordingly, Ms. Nupson’s
            revocation of the Assignment rendered the
            Assignment a nullity.

Trial court opinion, 10/2/15 at 6-7.

      We agree with the trial court that Nupson had the authority to revoke

the assignment under both the Uniform Trust Act and the 1982 Trust. We

must look at the validity of the revocation of the assignment in the context

of the 1982 Trust. The settlor of the 1982 Trust intended for the spendthrift

provision to be in place. Appellant attempts to raise the equitable defenses

in connection with the intent of his mother, Frances Middleton, in executing

her own estate plan which encompassed other trust agreements and family

settlement agreements.     The law on assignments by a beneficiary of a

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spendthrift trust is clear that the only concern is to give effect to the will of

the donor. In re Bosler’s Estate, 107 A.2d 443, 445 (Pa. 1954). Although

Nupson may have violated a family settlement agreement, she did not

violate any law or statute when she revoked the assignment. Appellant has

failed to establish that there was a dispute as to a material fact so as to

preclude the grant of a motion for summary judgment.              The defenses

asserted by appellant do not apply under the facts of this case to vitiate the

intent of the settlor in the 1982 Trust.

      Appellant next contends that the trial court erred as a matter of law

when it failed to apply Section 7746 of the Uniform Trust Act as written, and

instead determined what it believed the statute was designed to address.

      Section 7746 provides:

            (a)   Distribution not made within reasonable
                  time.--Whether or not the interest of the
                  beneficiary in the trust is subject to a
                  spendthrift provision, a creditor or assignee of
                  a beneficiary may reach a mandatory
                  distribution of income or principal, including a
                  distribution upon termination of the trust, if
                  the trustee has not made the distribution to
                  the beneficiary within a reasonable time after
                  the mandated distribution date.

            (b)   Definition.--As used in this section, the term
                  “mandatory distribution” means a distribution
                  of income or principal that the trustee is
                  required by the trust instrument to make to a
                  beneficiary, including a distribution upon the
                  termination of the trust. The term excludes a
                  distribution that is subject to the exercise of
                  the trustee's discretion regardless of whether
                  the trust instrument includes a support or

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                  other standard to guide the trustee in making
                  distribution decisions or provides that the
                  trustee “may” or “shall” make discretionary
                  distributions, including distributions pursuant
                  to a support or other standard.

20 Pa.C.S.A. § 7746(a), (b).

      Appellant argues that this provision means that spendthrift protection

remains in effect only for a reasonable time. Appellant asserts that Nupson

never explained why she waited one year after the death of her mother

which essentially terminated the trust before she revoked her assignment

and why she did not want appellant to file his accounting for the 1982 Trust.

      The trial court determined that none of these facts was material to the

questions presented regarding the validity of the spendthrift clause of the

1982 Trust, and Nupson’s power to revoke the assignment.

      This court agrees with the trial court.         A careful reading of

Section 7746 yields no applicability to the revocation of an assignment but

deals with a trustee’s distribution of trust proceeds within a reasonable time

and the ability of a creditor or assignee to reach a mandatory distribution

which the trustee has not made after a reasonable time.

      Order affirmed.

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 3/16/2017

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