Court Opinion

ID: 8206381
Source: CourtListenerOpinion
Date Created: 2022-09-14 17:09:00.89228+00
Date Added: 2024-06-11T16:41:15.151628
License: Public Domain

J-A08019-22

                                  2022 PA Super 158

    IN RE: TRUST UNDER DEED OF                 :   IN THE SUPERIOR COURT OF
    TRUST OF NELL G. JACK, SETTLOR             :        PENNSYLVANIA
    DATED MAY 29, 1981 (NELL G. JACK           :
    TRUST)                                     :
                                               :
                                               :
    APPEAL OF: CHRISTINE J. TORETTI            :
    AND JAMES H. MCELWAIN                      :
                                               :   No. 415 WDA 2021

                Appeal from the Order Entered March 2, 2021
     In the Court of Common Pleas of Allegheny County Orphans' Court at
                          No(s): No.2720 of 2005

BEFORE: BENDER, P.J.E., LAZARUS, J., and McCAFFERY, J.

OPINION BY LAZARUS, J.:                        FILED: September 14, 2022

       Christine J. Toretti (“Christine”) and James H. McElwain (“McElwain”),

Trustees of the Trust Under Deed of Trust of Nell G. Jack, Settlor (collectively,

“Trustees”), appeal from the order, entered in the Court of Common Pleas of

Allegheny County, Orphans’ Court Division, enjoining them1 from (1) using

assets of the Trust to pay legal fees and costs relating to the instant matter

without leave of court and (2) exercising any Special Power of Appointment

absent notice to Joseph J. Toretti (“Joseph”) or, upon Joseph’s objection,

without leave of court. Upon careful review, we vacate the order and remand

for further proceedings.

____________________________________________

1  It is well-settled that an order concerning a preliminary injunction is
appealable as of right pursuant to Pa.R.A.P. 311(a)(4) (permitting
interlocutory appeal as of right from order granting injunctive relief).
J-A08019-22

      The Orphans’ Court has set forth the factual and procedural history of

this matter as follows:

      This matter concerns a February 26, 2021 order entered by this
      court regarding the use [of] assets of [the Trust], which was
      established on May 29, 1981. [] The trust agreement had named
      three individual trustees: [Christine], Richard J. Kline and []
      McElwain, as well as a corporate trustee, the Savings & Trust
      Company of Pennsylvania. [] Kline and [] McElwain were removed
      as individual trustees in 1985 and 1988[,] respectively.
      Purportedly[,] those removals were at the instigation of
      [Christine] and, for a time thereafter, [Christine] served as sole
      individual trustee.

      In 1990, PNC Bank replaced S&T Bank as the corporate trustee.
      In October 2001, [Christine] re-appointed [] McElwain as trustee.
      Th[e] return of [] McElwain as trustee is alleged to have occurred
      for the purpose of enabling a ten-million-dollar investment [that]
      had been urged by [Christine,] but resisted by PNC. That
      investment, the purchase of 582 shares of stock of S.W. Jack
      Drilling Company[,] would afford the trust a majority interest in
      the drilling company. The petition in this matter alleged that,
      upon encountering resistance from PNC regarding a proposed ten-
      []million[-]dollar investment [that] PNC had regarded as
      impermissible self-dealing on the part of [Christine], [Christine]
      caused [] McElwain to be re-appointed as a trustee for the
      particular purpose of the two individual trustees, [Christine] and
      McElwain, [] overriding concerns expressed by PNC. The purchase
      of the stock was accomplished. At a later point, [Christine] and
      [] McElwain removed PNC as a corporate trustee and the terms of
      the trust were modified to eliminate the requirement that there be
      a corporate trustee. Presently, [Christine] and [] McElwain remain
      as the only trustees under the trust. Beneficiaries of the trust
      include Joseph [], who is the son of [Christine] and [] a grandson
      of the settlor, Nell G. Jack. Joseph has two siblings, Matthew and
      Maxwell, who are similarly beneficiaries of the trust.

      [In February 2018, Joseph filed a petition for citation for account
      directed to the Trustees. Ultimately, the Trustees filed an account,
      to which Joseph objected. In his objections, Joseph claimed: (1)
      the account failed to account for activities of the Trust from May
      29, 1981 to March 29, 1990 and (2) the Trustees’ actions were
      not taken in good faith or pursuant to the provisions of the Trust,

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     were not in the interest of the beneficiaries, and evidenced self-
     dealing in conflict with the interests of the beneficiaries. The
     Trustees each filed a response to Joseph’s objections. To address
     discovery issues amongst the parties, the court appointed the
     Honorable Joseph Del Sole as special master on September 24,
     2019. The court subsequently appointed Judge Del Sole to
     mediate the substantive disputes of the parties.

     On September 2, 2020, Joseph filed a petition for immediate
     removal of the Trustees.] The petition averred that [Christine]
     and [] McElwain had administered the trust in a manner which, to
     the extreme detriment of the intended beneficiaries of the trust,
     consistently inured to the self-interests of the two trustees. By
     way of relief, the petition requested that, pending final resolution
     of issues [that] had been raised in the April 15, 2019 objections
     to the account, the following actions should be taken: [Christine]
     and [] McElwain be removed as trustees; [Christine] and []
     McElwain be enjoined from using any trust assets for any purpose
     whatsoever, including the use trust assets to pay their legal fees
     in this litigation; [Christine] and [] McElwain reimburse the trust
     for any legal fees [that] have been paid on their behalf in this
     matter; [Christine] and [] McElwain be enjoined from exercising
     any power under the trust or purporting to exercise any special
     power of appointment otherwise provided under the trust; any
     prior exercise of such power of appointment by [Christine] and []
     McElwain be deemed null and void; an interim successor trustee
     be appointed with the power to make distributions to beneficiaries
     at the same level as such distributions had historically been made
     before the initiation of these proceedings in 2018; the
     beneficiaries be reimbursed for the fees incurred in pursuing this
     matter; and [] any interim successor trustee be compensated in
     accordance with the terms of Section 3.13 of the trust.

     [Christine] answered [] the petition, denying that any breach of
     fiduciary duties had occurred and denying, as well, that she had
     engaged in any self[-]dealing, placed her personal interests above
     those of the trust or its beneficiaries[,] or had otherwise caused
     any harm to the trust. McElwain later joined in that answer.

     Following argument, the court entered [an order enjoining the
     Trustees from using Trust assets to pay legal fees or costs relating
     to the ongoing litigation with Joseph, absent leave of court. The
     court also enjoined the Trustees from exercising any Special
     Power of Appointment under the Trust, absent prior notice to

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      Joseph and, upon his objection, without prior leave of court. The
      court denied the remaining requests for relief.]

Orphans’ Court Opinion, 7/21/21, at 2-5 (unnecessary capitalization omitted).

      Trustees filed a timely notice of appeal, followed by a court-ordered

Pa.R.A.P. 1925(b) concise statement of errors complained of on appeal. They

raise the following issues for our review:

      1. Whether the [Orphans’ Court] committed reversible error by
      granting[,] in part[,] Joseph[’s] request for injunctive relief
      without holding a hearing, without making any finding of
      wrongdoing by the Trustees, and without making a determination
      that immediate and irreparable injury would be sustained before
      a hearing could be held?

      2. Whether the [Orphans’ Court] abused its discretion and
      committed reversible error by granting injunctive relief that
      restricts Christine[’s] exercise of her nonfiduciary[] special power
      of appointment?

Brief of Appellants, at 5.

      We begin by noting that appellate courts review the grant of a

preliminary injunction for an abuse of discretion. Duquesne Light Co. v.

Longue Vue Club, 63 A.3d 270, 275 (Pa. Super. 2013) (citation omitted).

As our Supreme Court has emphasized:

      The standard of review applicable to preliminary injunction
      matters . . . is “highly deferential.” This “highly deferential”
      standard of review states that in reviewing the grant or denial of
      a preliminary injunction, an appellate court is directed to “examine
      the record to determine if there were any apparently reasonable
      grounds for the action of the court below.”

Id.

      Trustees first argue that the Orphans’ Court erred by granting, in part,

Joseph’s request for injunctive relief without:    (1) holding a hearing; (2)

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making any finding of wrongdoing by the Trustees; and/or (3) making a

determination that immediate and irreparable injury would be sustained

before a full hearing could be held.           Trustees assert that Joseph failed to

establish the six essential prerequisites for a preliminary injunction under

Pennsylvania law.

        In addition, Trustees argue that the Orphans’ Court erred in its

application of sections 7766(c) and 7781(b) of the Probate, Estates, and

Fiduciaries (“PEF”) Code2 as the basis for its injunction. These provisions grant

Orphans’ Courts the authority, pending a final decision on the removal of a

trustee, to grant “any appropriate relief” to “remedy a breach of trust that

has occurred or may occur.” 20 Pa.C.S.A. § 7781(b) (emphasis added).

Trustees argue that the highlighted language necessarily requires a court to

make a finding—prior to granting “appropriate relief”—that a breach of trust

has occurred or may occur.          Trustees assert that such a factual finding is

impossible without an evidentiary hearing.           For the following reasons, we

agree.

        The PEF Code provides authority for the grant of injunctive relief pending

a final decision on the removal of a trustee. Section 7766 of the PEF Code

provides as follows:

        (c) Court remedies.--Pending a final decision on a request to
        remove a trustee, or in lieu of or in addition to removing a trustee,
        the court may order appropriate relief under section 7781(b)
        (relating to remedies for breach of trust - UTC 1001) as may be
____________________________________________

2   20 Pa.C.S.A. §§ 101-8815.

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     necessary to protect the trust property or the interests of the
     beneficiaries.

20 Pa.C.S.A. § 7766(c). Section 7781(b), in turn, provides the court with the

following remedies:

     (b) Remedies.--To remedy a breach of trust that has
     occurred or may occur, the court may order any
     appropriate relief, including the following:

        (1) Compelling the trustee to perform the trustee’s duties.

        (2) Enjoining the trustee from committing a breach of trust.

        (3) Compelling the trustee to redress a breach of trust by
        paying money, restoring property or other means.

        (4) Ordering a trustee to file an account.

        (5) Taking any action authorized by Chapter 43 (relating to
        temporary fiduciaries).

        (6) (Reserved).

        (7) Removing the trustee as provided in section 7766
        (relating to removal of trustee - UTC 706).

        (8) Reducing or denying compensation to the trustee.

        (9) Subject to section 7790.2 (relating to protection of
        person dealing with trustee - UTC 1012):

           (i) voiding an act of the trustee;

           (ii) imposing a lien or a constructive trust on trust
           property; or

           (iii) tracing trust property wrongfully disposed of and
           recovering the property or its proceeds.

20 Pa.C.S.A. § 7781(b) (emphasis added).

     The procedure for obtaining an injunction in the Orphans’ Court is

derived from the Pennsylvania Rules of Civil Procedure. See Pa.R.O.C.P. 7.4

(“Upon petition, the court may issue a preliminary, special, or permanent

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injunction in accordance with the rules and procedures provided in Pa.R.C.P.

[] 1531.”). Pursuant to Pa.R.C.P. 1531,

     A court shall issue a preliminary or special injunction only after
     written notice and hearing, unless it appears to the satisfaction of
     the court that immediate and irreparable injury will be sustained
     before notice can be given or a hearing held, in which case the
     court may issue a preliminary or special injunction without a
     hearing or without notice. In determining whether a preliminary
     or special injunction should be granted and whether notice or a
     hearing should be required, the court may act on the basis of the
     averments of the pleadings or petition and may consider affidavits
     of parties or third persons or any other proof which the court may
     require.

Pa.R.C.P. 1531(a).   Accordingly, a court will ordinarily issue a preliminary

injunction only after written notice and hearing.     WPNT Inc. v. Secret

Commc’n Inc., 661 A.2d 409, 410–11 (Pa. Super. 1995). “A preliminary

injunction may be granted without notice and a hearing only when there exists

a need for unusual haste so that a clear right may be protected from

immediate and irreparable injury.”   Id. at 411 (citation omitted).    In that

event, the court must make a finding that relief is necessary and must be

awarded before the defendant can be notified. Id. If the court then fails to

conduct a hearing within five days, the injunction is deemed dissolved. See

Pa.R.C.P. 1531(d).

     To establish entitlement to injunctive relief, a party must show that: (1)

an injunction is necessary to prevent immediate and irreparable harm that

cannot be adequately compensated by damages; (2) greater injury would

result from refusing an injunction than from granting it, and, concomitantly,

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that issuance of an injunction will not substantially harm other interested

parties in the proceedings; (3) a preliminary injunction will properly restore

the parties to their status as it existed immediately prior to the alleged

wrongful conduct; (4) the activity it seeks to restrain is actionable, that its

right to relief is clear, and that the wrong is manifest, or, in other words, must

show that it is likely to prevail on the merits; (5) the injunction it seeks is

reasonably suited to abate the offending activity; and (6) a preliminary

injunction will not adversely affect the public interest. See Summit Towne

Ctr., Inc. v. Shoe Show of Rocky Mount, Inc., 828 A.2d 995, 1001 (Pa.

2003). For a preliminary injunction to issue, every one of these prerequisites

must be established; if the petitioner fails to establish any one of them, there

is no need to address the others. Allegheny Cnty. v. Commonwealth, 544

A.2d 1305, 1307 (Pa. 1988)

       Here, Joseph filed his petition seeking a preliminary injunction on

September 2, 2020. The court waited until February 26, 2021, before entering

its order granting injunctive relief, and did so without either holding a hearing

or making a finding that “immediate and irreparable injury w[ould] be

sustained” if it failed to grant relief prior to convening a hearing.3       See

Pa.R.C.P. 1531(a). The court made no finding that “a breach of trust [] has

occurred or may occur,” as required under 20 Pa.C.S.A. § 7781(b), nor did it

____________________________________________

3 Indeed, the fact that the court waited more than five months to enter an
order implicitly demonstrates that the court believed there was no risk of
immediate and irreparable injury.

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address the six prerequisites for a preliminary injunction.        See Summit

Towne Ctr., Inc., supra.           Accordingly, we are constrained to vacate the

court’s order granting injunctive relief and remand for a hearing.

       Although we have concluded that the Orphans’ Court erred, as a general

matter, by granting injunctive relief without a hearing or a finding of

irreparable harm, we deem it necessary to address Trustees’ second

assignment of error regarding the power of appointment.              Specifically,

Trustees assert that the Orphans’ Court erred in granting injunctive relief

restricting Christine’s4 exercise of her nonfiduciary special power of

appointment because her authority under the power of appointment is

separate and distinct from her duties as a fiduciary and no duty of good faith

applies. We agree, and direct that, upon remand, the Orphans’ Court may not

enjoin Christine from exercising the power of appointment.

       “A power of appointment is a power that enables the donee of the power

to designate recipients of beneficial ownership interests in[,] or powers of

appointment over[,] the appointive property.” Restatement (Third) of

Property (Wills & Don. Trans.) § 17.1 (2011); accord 20 Pa.C.S.A. § 7703,

cmt. “In exercising the power, the donee must observe strictly its provisions

and limitations.” Estate of duPont, 379 A.2d 570, 571 (Pa. 1977), quoting

Rogers’ Estate, 67 A. 762, 762 (Pa. 1907). A donee’s duty is to the donor

____________________________________________

4 The court’s order also enjoined McElwain from exercising any power of
appointment under the Trust. However, only Christine, in her individual
capacity, holds a power of appointment.

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and the donee must exercise the power within the donor’s established

conditions. In re Estate of Zucker, 122 A.3d 1112, 1117 (Pa. Super. 2015).

The holder of a power of appointment is a beneficiary of a trust, and not a

trustee or other fiduciary, and is not bound by a duty of good faith. Id. at

1116-17. Where the language of the document so provides, a donee may

select some of the potential appointees to the exclusion of the others.5 Id.

at 1117. Put another way, in exercising a power of appointment, the donee

is limited only by the terms of the document under which the power was

granted.

       Here, Article I, Section 2.2 of the Trust (“Special Power of Appointment”)

provides as follows:

       During the lifetime of Christine [] or upon her death, the Trustees
       shall distribute the Trust Estate to or for the benefit of such one
       or more of the issue of Christine [] as Christine [] may appoint by
       specific reference in a deed or in her will to this power; provided,
       however, that Christine [] shall have no authority hereunder to
       discharge any legal obligation she may have.

Irrevocable Trust of Nell G. Jack, 5/29/81, at Article I, § 2.2. By using the

clause “such one or more,” Settlor granted Christine an exclusionary power of

appointment, allowing her to select, in her discretion, amongst the potential

appointees. Her power is limited only by the prohibition against using the
____________________________________________

5 An exclusionary power of appointment is one in which the donor has
authorized the donee to appoint to any one or more of the permissible
appointees, to the exclusion of the others. Restatement (Third) of Property
(Wills & Don. Trans.) § 17.5 (2011). A power of appointment is exclusionary
unless the terms of the power expressly provide that an appointment must
benefit each permissible appointee or one or more designated permissible
appointees. Id.

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power of appointment to discharge a legal obligation.6       Because Christine

holds an exclusionary power of appointment in her individual capacity and is

not bound by duty of good faith in her exercise of that power, see In re

Estate of Zucker, supra, the Orphans’ Court erred by issuing an injunction

limiting her exercise of the power based on allegations regarding her conduct

as a fiduciary.

       Order vacated. Case remanded for further proceedings consistent with

the dictates of this opinion. Jurisdiction relinquished.

____________________________________________

6 Joseph’s argument that Christine is attempting, in contravention of the terms
of the Trust, to discharge a legal obligation by threatening to “remove [him]
as a beneficiary through the exercise of the [power] unless he drops the claims
against her” is unavailing. Brief of Appellee, at 65. Joseph fails to identify
any legal obligation Christine would discharge by exercising the power of
appointment. Rather, he baldly characterizes alleged threats made by
Christine to exercise the power of appointment as the discharging of a legal
obligation. Similarly unavailing is Joseph’s argument—unsupported by any
reference to relevant authority—that “the Trust Agreement, at its core, is a
contract, and every contract carries an inherent duty of good faith and fair
dealing.” Id. at 66. See In re Steinsapir, 572 A.2d 1270, 1274 (Pa. Super.
1990) (declining to apply doctrine of promissory estoppel in litigation involving
trust because “[w]e are examining a trust, not a contract, and cannot give
effect to an amendment which is invalid under the trust agreement by applying
a principle of contract law”).

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 9/14/2022

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