Court Opinion

ID: 4151562
Source: CourtListenerOpinion
Date Created: 2017-03-09 19:12:07.010558+00
Date Added: 2024-06-11T14:03:11.537604
License: Public Domain

J-S08039-17

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    IN RE: TESTAMENTARY TRUST                  :   IN THE SUPERIOR COURT OF
    ESTABLISHED BY THE LAST WILL               :        PENNSYLVANIA
    AND TESTAMENT OF LUCY B.                   :
    NORTHCRAFT, LATE OF MANN                   :
    TOWNSHIP, BEDFORD COUNTY,                  :
    PENNSYLVANIA, DECEASED                     :
                                               :
                                               :
    APPEAL OF: DARRELL NORTHCRAFT              :       No. 1105 WDA 2016

                  Appeal from the Order Entered June 29, 2016
                In the Court of Common Pleas of Bedford County
                     Orphans’ Court at No(s): 2014-00072

BEFORE:      GANTMAN, P.J., FORD ELLIOTT, P.J.E., and SOLANO, J.

MEMORANDUM BY GANTMAN, P.J.:                            FILED MARCH 09, 2017

        Appellant, Darrell Northcraft, appeals from the order entered in the

Bedford County Court of Common Pleas, Orphans’ Court, which terminated

the testamentary trust established by the last will and testament of Lucy B.

Northcraft (“Decedent”), and distributed the trust property to the third-class

beneficiaries, Decedent’s great-grandchildren. We affirm.

        In its June 29, 2016 opinion, the Orphans’ Court set forth the relevant

facts of this case as follows:

          The facts of the matter are not in dispute.
          Decedent[1]…created a non-charitable testamentary trust
          (“Trust”) in her Last Will and Testament.        The sole
          property of the testamentary trust consists of two parcels
          of land in Southampton and Mann Townships of Bedford
____________________________________________

1
    Decedent died on May 7, 1986.
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          County, Pennsylvania. The Trust granted a life estate[2]
          interest to Decedent’s oldest child, with said life estate
          progressing through each of her other children, prioritized
          by their ages. Life estate interests were then extended to
          Decedent’s grandchildren upon the death of her last child,
          again prioritized by age. Upon the death or disclaimer of
          Decedent’s youngest grandchild, the Trust was to
          terminate with all property to be distributed to Decedent’s
          great-grandchildren.     [Appellant] is Decedent’s last
          remaining child. For several years, the formal terms of the
          Trust have not been carried out, including the replacement
          of Trustees.

          [Appellant] seeks to have the Trust terminated and the
          Trust property distributed solely to him as the sole
          remaining child of Decedent.        Respondents from the
          second-class beneficiaries (i.e., grandchildren) and third-
          class beneficiaries (i.e., great-grandchildren) consent in
          the termination of the Trust, but seek to have the Trust
          property distributed to the [great-grandchildren]. …

(Memorandum Opinion, filed June 29, 2016, at 1-2).            Specifically, the

relevant language of the Trust provides:

          THIRD: I devise all of my real estate to my Trustees,
          hereinafter named, IN TRUST, NEVERTHELESS, for the
          following uses and purposes:

                                       *       *   *

             B.    My son, Ernest A. Northcraft, shall have the right
          to make his home on the premises, and to occupy the
          land, my house, the barn and all other farm buildings
          existing on the date of this Will or which I or he may
          hereafter erect so long as he shall live, provided, however,
          my son, Ernest, shall be solely responsible for all taxes,
          maintenance and other expenses involved in maintaining
____________________________________________

2
   The parties dispute whether the Trust actually created a “life estate”
interest in, or merely a right to reside on, the Trust property. We will
discuss this issue more fully later in this decision.

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       the property and shall receive all income from any and all
       sources whatever received in respect to the property. Said
       income shall be considered the sole property of my son,
       Ernest, while he resides on the property, and this trust
       shall have no right or other access to said income and it
       shall not be considered a distribution from the trust estate
       to my said son. On the death of my said son or in the
       event he should choose not to continue to reside on the
       premises, my next oldest child shall have the right to make
       his/her home on the premises. This privilege of residing
       on the premises shall be extended to each of my children
       in order of priority based on their ages. On the death of
       the child having and exercising the privilege or in the
       event any child having the privilege should choose not to
       make his/her home on the premises, the privilege shall be
       extended to the next oldest child, and so on, provided any
       child exercising the privilege shall assume the
       responsibility for taxes, maintenance and upkeep required
       of my son, Ernest, and provided, further, any such child
       making his/her home on the premises shall be entitled to
       receive all of the income earned in respect to the property
       in the same manner discussed in subparagraph A above up
       to but not in excess of the sum of Fifteen Thousand Dollars
       ($15,000.00).      All such income in excess of Fifteen
       Thousand Dollars ($15,000.00) shall be receivable by the
       trust and distributed as trust income as hereinabove
       provided to all of my beneficiaries, including any of my
       beneficiaries who then may be residing on the property.

                               *    *    *

          E.     On the death of the survivor of my children this
       trust shall continue under the same terms and conditions
       for the benefit of my grandchildren including the privileges
       granted by paragraph B of this Article THIRD above with
       the privilege therein granted concerning the right to make
       his/her home on the premises being granted in order to
       the oldest grandchild then living.     When none of my
       children, my granddaughter, Betty Ann Northcraft, nor any
       of my grandchildren are then living, this trust shall
       terminate and the then remaining principal, and
       accumulated or undistributed income shall be distributed,
       in equal shares, to the then living children of my

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            grandchildren, without regard to any distribution made
            under any other provision of this Article THIRD.

                                    *    *    *

            EIGHTH: I appoint as Trustees of the trust created herein
            each of my children as shall survive me, they to serve as
            Co-trustees for so long as they live. Upon the death of any
            trustee, the remaining Trustees shall elect from among my
            grandchildren a replacement trustee to succeed to all the
            rights and privileges of my deceased trustee.

                                    *    *    *

(Decedent’s Last Will and Testament, dated January 22, 1979, at 1-3, 5).

      Procedurally, on August 6, 2014, Appellant filed a petition for

termination of the Trust, alleging the original purpose of the Trust could no

longer be served. Specifically, Appellant claimed the expenses necessary to

maintain the property exceeded any potential income produced from the

property. Appellant also maintained that he resided elsewhere and did not

want to move onto the property and make necessary expenditures where,

upon Appellant’s death, the right of life occupancy and the benefits of any

improvements Appellant made would pass to Decedent’s eldest then-living

grandchild, whose identity was still unknown. Appellant asked the court to

terminate the Trust and to distribute all Trust property solely to him because

Decedent’s “probable intent” was to distribute her property to her surviving

children.    As well, Appellant insisted he was entitled to reimbursement for

expenses he allegedly paid relating to the preservation of the property and

its maintenance and upkeep since the interest in the property passed to him

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in 2006. Appellant averred his claim for reimbursement should constitute a

lien on the property.

       On March 6, 2015, Respondents Michael P. Northcraft (Decedent’s

grandchild) and Michael E. Northcraft (Decedent’s great-grandchild),3 filed

an answer and new matter opposing termination of the Trust. Respondents

claimed, inter alia, the property could be income producing if used properly.

Respondents insisted they offered to assist Appellant with expenses

necessary to maintain the property but Appellant refused their offers.

Respondents alleged Appellant maintained sole and exclusive control of the

property since at least 2006, and excluded all other beneficiaries from the

property except for his own children. Respondents asserted the affirmative

defense of unclean hands, alleging Appellant breached his duties as trustee

by, inter alia, failing to select replacement trustees. Appellant filed a reply

on May 29, 2015. On September 10, 2015, the court appointed counsel for

the remaining third-class beneficiaries.         The court held a hearing on the

matter on February 17, 2016, at which time the court received argument

from all counsel.      The court deferred its ruling pending the submission of

post-hearing memoranda.          In post-hearing memoranda, all parties agreed

____________________________________________

3
  Michael P. Northcraft died during the pendency of this case. Michael E.
Northcraft is the son of Michael P. Northcraft and the executor of his estate.
Michael E. Northcraft states on appeal that he made no request to substitute
the estate as a party because any interest Michael P. Northcraft had in the
Trust property ceased upon his death.

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that termination of the Trust was proper. Respondents and the remaining

third-class beneficiaries asked the court to distribute the Trust property to

the third-class beneficiaries.4 Appellant sought distribution solely to himself.

        On June 29, 2016, the court entered an order terminating the Trust

and   distributing    the    Trust   property    to   the   third-class   beneficiaries,

Decedent’s great-grandchildren. Appellant timely filed a notice of appeal on

July 28, 2016, per Pa.R.A.P. 342(a)(4) (explaining appeal may be taken as

of right from order terminating trust).          The next day, the court ordered

Appellant to file a concise statement of errors complained of on appeal

pursuant to Pa.R.A.P. 1925(b).           Appellant timely complied on August 18,

2016.

        Appellant raises two issues for our review:

           SHOULD THE [ORPHANS’] COURT HAVE CONSIDERED
           OTHER   PROVISIONS   OF   [DECEDENT’S] WILL IN
           ASCERTAINING WHAT DISTRIBUTION OF THE TRUST
           PROPERTY UPON TERMINATION WAS CONSISTENT WITH
           THE PURPOSES OF THE TRUST?

           WHERE A TESTATRIX HAS CREATED A TESTAMENTARY
           TRUST IN REAL ESTATE AND PROVIDED FOR A SEQUENCE
           OF LIFE INTERESTS VESTING SUCCESSIVELY IN THE
           ELDEST SURVIVOR AMONG FIRST A CLASS CONSISTING
           OF HER CHILDREN, AND SECOND A CLASS CONSISTING
           OF HER GRANDCHILDREN, WITH REMAINDER IN FEE PER
           CAPITA TO A THIRD CLASS CONSISTING OF HER THEN
           LIVING GREAT-GRANDCHILDREN, MAY THE COURT UPON
           TERMINATION UNDER 20 PA.C.S.A. § 7740.2 BECAUSE OF
____________________________________________

4
  Respondents and the remaining third-party beneficiaries also opposed
Appellant’s claim for reimbursement of expenses.

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         CIRCUMSTANCES    THAT   APPARENTLY    WERE    NOT
         ANTICIPATED BY THE TESTATRIX, BEFORE THE DEATH OF
         ALL MEMBERS OF THE FIRST AND SECOND CLASSES,
         AWARD THE TRUST PROPERTY EXCLUSIVELY TO THE
         THIRD CLASS, EFFECTIVELY EXTINGUISHING THE LIFE
         INTERESTS?

(Appellant’s Brief at 3).

      Our standard and scope of review are as follows:

         Our standard of review of the findings of an [O]rphans’
         [C]ourt is deferential.

            When reviewing a decree entered by the Orphans’
            Court, this Court must determine whether the record
            is free from legal error and the court’s factual
            findings are supported by the evidence. Because the
            Orphans’ Court sits as the fact-finder, it determines
            the credibility of the witnesses and, on review, we
            will not reverse its credibility determinations absent
            an abuse of that discretion.

            However, we are not constrained to give the same
            deference to any resulting legal conclusions.

         In re Estate of Harrison, 745 A.2d 676, 678-79
         (Pa.Super. 2000), appeal denied, 563 Pa. 646, 758 A.2d
1200 (2000) (internal citations and quotation marks
         omitted). “[T]he Orphans’ [C]ourt decision will not be
         reversed unless there has been an abuse of discretion or a
         fundamental error in applying the correct principles of
         law.”  In re Estate of Luongo, 823 A.2d 942, 951
         (Pa.Super. 2003), appeal denied, 577 Pa. 722, 847 A.2d
1287 (2003).

In re Estate of Whitley, 50 A.3d 203, 206-07 (Pa.Super. 2012), appeal

denied, 620 Pa. 724, 69 A.3d 603 (2013).

      For purposes of disposition, we combine Appellant’s issues. Appellant

argues Decedent’s will, read in its entirety, sheds the best light on

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Decedent’s probable intent concerning how to distribute the Trust property.

Appellant avers Decedent made numerous provisions throughout her will

intending to benefit her “then surviving children.”    For example, Appellant

highlights Article SECOND of the will, in which Appellant bequeathed tangible

personalty to her surviving children, as well as the residuary clause of the

will at Article SEVENTH, which vests the remainder of Decedent’s estate in

“such of my children as survive me.” Appellant suggests Decedent’s purpose

in formulating the trust was to benefit only one child at a time in each

generation (the eldest survivor), even if that meant excluding any or all

younger members of the same generation or all members of the next

generation. Appellant insists Decedent designated her children as trustees,

vesting them with certain authority Decedent did not similarly grant to later

generations.     Appellant maintains the court erred by focusing its analysis

predominately on the language at Article THIRD of Decedent’s will without

examining the will in its entirety to ascertain Decedent’s probable intent in

light of the present circumstances. Given her testamentary plan as a whole,

Appellant suggests Decedent would have intended the Trust property to pass

to the person with whom she enjoyed the closest relation—her only surviving

child.

         Even if the court’s decision not to award Appellant the Trust property

was proper, Appellant argues he is entitled to reimbursement for the value

of the life estate he held in the property. Appellant claims the court ignored

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Decedent’s purpose to provide a benefit to her children (and then

grandchildren) during their lifetimes by distributing the Trust property only

to the third-party beneficiaries, Decedent’s great-grandchildren.   Appellant

concedes the language of Article THIRD provides for distribution to the

great-grandchildren upon termination of the trust, but he suggests this

purpose was to occur only after the death of all of Decedent’s children and

grandchildren.      Appellant contends Decedent would not have wanted to

bypass her living children and grandchildren upon early termination of the

trust. Appellant concludes the Orphans’ Court erred by distributing the Trust

property solely to Decedent’s great-grandchildren, and this Court must

reverse and remand for the Orphans’ Court to reconsider its decision

concerning the Trust property; or, in the alternative, conduct further

proceedings regarding the valuation of Appellant’s life interest. 5      We

disagree.

       The Decedents, Estates and Fiduciaries Code (“Code”) provides, in

pertinent part, as follows:

          §  7740.2.       Modification   or   termination of
          noncharitable irrevocable trust by court—UTC 412

          (a)   Unanticipated circumstances.—The court may
          modify the administrative or dispositive provisions of a
          noncharitable irrevocable trust, make an allowance from
____________________________________________

5
 On appeal, Appellant abandoned his claim for reimbursement of expenses
Appellant allegedly paid relating to the preservation of the property and its
maintenance and upkeep.

                                           -9-
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        the principal of the trust or terminate the trust if, because
        of circumstances that apparently were not anticipated by
        the settlor, modification, allowance or termination will
        further the purposes of the trust.           To the extent
        practicable,   the    modification    or   allowance     shall
        approximate the settlor’s probable intention.

        (b)     Inability to administer effectively.—The court
        may modify the          administrative   provisions of a
        noncharitable irrevocable trust if adherence to the existing
        provisions would be impracticable or wasteful or impair the
        trust’s administration.

        (c)    Distribution of property.—Upon termination of a
        trust under this section, the trustee shall distribute the
        trust property in a manner consistent with the purposes of
        the trust.

20 Pa.C.S.A. § 7740.2.

     “A life estate is defined as an estate whose duration is limited to the

life of the party holding it, or some other person.” In re Paxson Trust I,

893 A.2d 99, 115 (Pa.Super. 2006), appeal denied, 588 Pa. 759, 903 A.2d
538 (2006) (internal citation and quotation marks omitted).

        A life estate arises when a conveyance or will expressly
        limits the duration of the created estate in terms of the life
        or lives of one or more persons, or when the will or
        instrument creating the interest, viewed as a whole,
        manifests the intent of the transferor to create an estate
        measured by the life or lives of one or more persons. A
        life estate has the quality of alienability, thus the life
        estate can be conveyed to a third person; but, the life
        estate holder cannot convey a greater interest than he/she
        possesses. Generally, the life estate holder is responsible
        for interest on any mortgage on the property, and has a
        duty to pay current taxes and assessments, by a
        municipality or other public authority, which do not exceed
        the probable duration of the life estate.

Id. (internal citations omitted).   “[T]he use of any particular phrases or

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words of art is not required in order to create or reserve a life estate.” Id.

(holding trust deed executed by children’s maternal grandfather conveying

family home to children’s parents as trustees for children granted parents

life estate in home; trust deed conveyed property to parents “for their sole

and separate use, for [and] during the term of their natural life”; deed

stated that upon parents’ death, premises shall vest in their children,

absolutely and in fee simple; upon termination of trust, parents were

entitled to reimbursement for value of their life estates). Compare Estate

of Culig, 134 A.3d 463 (Pa.Super. 2016) (holding will which granted

decedent’s wife “right to reside” in his residence without payment of rent

until her death, or other certain events occurred, did not grant wife life

estate but merely license or privilege to continue to occupy or reside at

decedent’s residence; Orphans’ Court erred by construing nature of wife’s

interest in real estate as that of life tenant; even though wife was not “life

tenant,” she was still obligated to make routine repairs and maintenance to

property while she enjoyed use of property).     See also Baldesberger v.

Baldesberger, 378 Pa. 113, 105 A.2d 713 (1954) (distinguishing between

life estate and right to reside or occupy; decedent’s will granted his children

right to use their father’s farm as home if they remained unmarried; holding

interest in question was incorporeal right to reside on property; while

decedent gave his wife farm for her life without qualification, decedent gave

his children right to use farm as home only if they remained unmarried;

                                    - 11 -
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thus, decedent’s will granted children privilege to occupy property as their

home, nothing more).

     Instantly, the Orphans’ Court addressed Appellant’s issues as follows:

        [Appellant] contends that the Trust has become
        unworkable in that, inter alia, no replacement trustees
        have ever been elected and that [Appellant] has become
        solely responsible for the maintenance of the property with
        no desire to exercise the benefits, or continue the
        responsibilities, of his interest.       Both groups of
        Respondents agree that [Appellant’s] inaction and
        unwillingness to disclaim his interest, have so frustrated
        the purpose of the Trust that termination is necessary. We
        concur with the position of all parties. While we note that
        the consent of all interested parties to terminate a trust
        does not necessitate such a result, we are left with no
        other conclusion in this case. Given the longstanding
        noncompliance with the terms of the Trust, and the current
        stalemate in which the Trust is now mired, we find that
        only termination of the [T]rust will ultimately further the
        original purposes of the Trust.

                                *     *      *

        Having found that termination of the Trust is necessary,
        we now turn to the issue of how the Trust property should
        be distributed. …

        [Appellant] argues that the Trust property should be
        distributed solely to [him] as the sole remaining child of
        Decedent. In support of this argument, [Appellant] points
        to what he views as the scheme of distribution in
        Decedent’s Last Will and Testament. [Appellant] claims
        that there is a clear intent by Decedent to benefit a
        generation of descendants—regardless of the number of its
        members—to the exclusion of the next generation of
        descendants.      We are unpersuaded by [Appellant’s]
        argument.

        The plain language of Section 7740.2(c) commands that
        we distribute the property consistent with the purposes of
        the Trust, not what may be perceived as the overall

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        testamentary scheme of Decedent’s Last Will and
        Testament. And, the clear purpose of the Trust was to
        provide a life estate to Decedent’s children (and then
        grandchildren) individually in succession, thereby affording
        a benefit to Decedent’s heirs and providing a manner of
        maintaining the Trust property.       Once the life estate
        successions had run their course through Decedent’s
        children and grandchildren, however, the purpose of the
        Trust then changes to provide for Decedent’s great-
        grandchildren by distributing the Trust property amongst
        them upon termination. Therefore, we view the ultimate
        purpose of the Trust as providing for Decedent’s great-
        grandchildren with the prior generations supporting this
        purpose by maintaining the Trust property. Accordingly,
        we are of the opinion that the Trust property should be
        distributed to the great-grandchildren upon termination.

        In support of our decision we note that, under no language
        of the Trust (nor by any normal operation thereof), was
        the Trust property ever to be distributed to Decedent’s
        children—nonetheless a sole child. Therefore, Decedent
        never contemplated, nor intended, the result for which
        [Appellant] argues. Decedent did, however, intend for the
        Trust property to ultimately vest amongst her great-
        grandchildren. While we understand that our decision
        arrives at Decedent’s intended result in a manner that is
        unintended,    we    nonetheless   find   this  result  to
        exponentially further the purposes of the Trust [more]
        than [Appellant’s] proposal.

(Memorandum Opinion at 2-4) (internal citations omitted) (emphasis in

original). We see no reason to disrupt the court’s decision to terminate the

Trust and to distribute the Trust property to Decedent’s great-grandchildren,

consistent with the ultimate purpose of the Trust.      See 20 Pa.C.S.A. §

7740.2(a), (c); Estate of Whitley, supra.

     We depart from the Orphans’ Court’s analysis only to the extent that it

characterizes the interest granted to Decedent’s children and grandchildren

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as “life estates.”   Decedent granted her children (and then grandchildren)

“the right to make [their] home on the premises.” (Decedent’s Last Will and

Testament at 2). Upon the death of each child (prioritized by age) “or in the

event [the child] should choose not to continue to reside on the premises,”

the “right to reside” passed to the next oldest child. Decedent repeatedly

referred to the rights granted to each child and grandchild as the “privilege”

of residing on the premises. Id. Significantly, Decedent did not intend for

her children or grandchildren to enjoy certain benefits of the property if they

chose not to reside there, such as the ability to collect rent from the

property.     Likewise, Decedent did     not intend    to   grant children or

grandchildren the right to convey the property to a third party. Rather, if

the child or grandchild chose not to exercise his/her right to reside on the

property, the interest then passed to the next child/grandchild in line. Under

these circumstances, Decedent granted each child and grandchild a “right to

reside,” not a life estate.     See Baldesberger, supra; Culig, supra.

Compare In re Paxson Trust I, supra. Because Appellant did not have a

life estate interest in the Trust property, he is not entitled to reimbursement

for the value of his interest in the property. See id. Accordingly, we affirm.

      Order affirmed.

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 3/9/2017

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