Court Opinion

ID: 9877557
Source: CourtListenerOpinion
Date Created: 2023-09-27 16:08:42.400841+00
Date Added: 2024-06-11T13:34:25.127605
License: Public Domain

J-A01035-23

                              2023 PA Super 186

 IN RE: SLETTEN FAMILY TRUST              :   IN THE SUPERIOR COURT OF
                                          :        PENNSYLVANIA
                                          :
 APPEAL OF: KATHRYN SLETTEN,              :
 IKOR, TRUSTEES, ACCOUNTANTS              :
                                          :
                                          :
                                          :
                                          :   No. 408 EDA 2022

            Appeal from the Order Entered December 27, 2021
  In the Court of Common Pleas of Montgomery County Orphans’ Court at
                           No(s): 2017-X2838

 IN RE: SLETTEN FAMILY TRUST              :   IN THE SUPERIOR COURT OF
                                          :        PENNSYLVANIA
                                          :
 APPEAL OF: CHAD SLETTEN,                 :
 CHRISTOPHER SLETTEN, DANIEL              :
 SLETTEN, JOSEPH SLETTEN, KELLY           :
 DAHL                                     :
                                          :
                                          :   No. 507 EDA 2022

            Appeal from the Order Entered December 27, 2021
  In the Court of Common Pleas of Montgomery County Orphans’ Court at
                           No(s): 2017-X2838

BEFORE: LAZARUS, J., NICHOLS, J., and McCAFFERY, J.

OPINON BY LAZARUS, J.:                          FILED SEPTEMBER 27, 2023

      Before this Court are cross-appeals from the adjudication entered in the

Court of Common Pleas of Montgomery County, Orphans’ Court Division,

granting certain objections filed by Chad Sletten, Christopher Sletten, Danielle

Sletten, Joseph Sletten, and Kelly Dahl (collectively, Sletten Children) to the
J-A01035-23

Second Account1 of the Sletten Family Trust (Trust) filed by Kathryn Sletten

(Kathryn) and IKOR (collectively, Co-Trustees), and ultimately surcharging

the Co-Trustees and denying their request for attorneys’ fees.         Sletten

Children cross appeal the Orphans’ Court’s determination that a mortgage was

a valid debt of the trust, and request that this Court award sanctions in the

form of attorneys’ fees. Upon review, we affirm the court’s substantive rulings

on the objections, deny the Sletten Children’s request for sanctions, and

remand solely for a recalculation of the amount remaining for distribution as

discussed infra.

       This matter concerns whether certain mortgage payments made by

Kathryn and/or IKOR from Trust funds were valid Trust obligations. The Trust

was created on May 15, 1998,2 by Ida Marie Sletten (Settlor), following the

death of her husband, Warren Sletten (Warren), solely for the purpose of

holding property situated at 138 Summer Ridge Drive, Landsdale, PA

(“Property”).      Warren and Settlor purchased the Property in 1995 for

$218,530.00 to serve as a home for their son, John Sletten, and his wife,

Kathryn, co-trustee herein. N.T. Hearing on Objections, 11/15/21, at 18.

____________________________________________

1 Kathryn had also filed a First Accounting for the period between May 15,
1998 and August 1, 2017. Major differences in these accountings include an
uncontested distribution of $80,000 to the Sletten Children, which was
included in the second account, but omitted from the first account.

2 This Court has previously determined that the May 15, 1998 trust is valid.

Est. of: Sletten Family Trust, appeal of Dahl, K., 2289 EDA 2018 (Pa.
Super. filed July 6, 2018) (unpublished memorandum decision).

                                           -2-
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       When the Property was purchased, Warren and Settlor gifted the sum

of $80,000.00 to John and Kathryn for the down payment and closing costs

and executed a $160,000.00 promissory note and mortgage on the Property

with Hatboro Federal Savings Bank (“Hatboro Mortgage”) in their own names.

John, acting in his capacity as agent for Warren under a power of attorney,

executed both documents, along with Settlor. Kathryn testified that, at that

time, there had been an unwritten “understanding” that John and Kathryn

would be liable for the Hatboro Mortgage payments and that the Property

would include a mother-in-law suite. Id. at 19, 21. Kathryn testified that

John and Kathryn made payments on the Hatboro Mortgage starting in

September of 1995 and that Warren and Settlor did not make mortgage

payments. Id. at 25.

       Following the creation of the Trust, on March 3, 1998, Settlor executed

a deed transferring the Property to the Trust3 and appointed John and Kathryn

as co-trustees. Trustees were to be compensated for out-of-pocket expenses

incurred but not for their services, and were granted the following powers: to

sell, exchange, or otherwise dispose of the Property without court approval;

to lease or grant options to buy for terms extending beyond the period of

administration or duration of the trust; to make any division of distribution

required hereunder in cash or in kind; and to serve without filing annual

____________________________________________

3 The deed does not state whether the Property was transferred “subject to”

or “upon assignment” of the mortgage. Payment of the promissory note was
not made an obligation of the Trust.

                                           -3-
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returns or reports and without giving bond.           See Trust, at Article III

(Appointment of Trustee); id. at Article VIII (Powers of Trustee).

       The Trust also provided John with a beneficial life tenancy, permitting

him to “occupy the [Property] as his primary residence and [providing that

he] may exercise all rights in and to such real estate.” See id. at Article III

(Life Interest Beneficiaries).         The Trust also provides that “under no

circumstances shall [John] mortgage, encumber, alienate, or in any way

transfer or assign his beneficial life interest or any rights therein tantamount

to ownership in such real estate.” Id. (emphasis added). If John were to

either voluntarily or involuntarily (due to financial distress, court judgment,

bankruptcy, or other financial reasons) vacate the Property for more than 30

days, his beneficial life interest in the Property was to terminate immediately.

Id.   John was also provided an interest in assets consisting of quarterly

installments of income and principal distributions required and appropriate for

John’s health and well-being. Id.4 The same tenancy interest was provided

to Kathryn if she and John were married when John’s interest terminated. Id.5

       Upon termination of John and Kathryn’s life interests, the Property was

to be sold and trust assets distributed as follows: $80,000.00 to John’s issue

in equal shares per stirpes; and the remainder divided into two equal shares

____________________________________________

4  The Trust never held any liquid assets or made income or principal
distributions to John.

5 Kathryn is not named as a beneficiary of income or principal.

                                           -4-
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with one share divided equally among John’s children and the other divided

equally among Kathryn’s children.6               See id. at Article VI—Remainder

Beneficiaries. The Trust was then to terminate.

       Following Trust execution, John and Kathryn continued to make

payments on the Hatboro Mortgage of $1,146.26 per month. N.T. Hearing on

Objections, 11/15/21, at 24. On October 20, 1999, John and Kathryn, as co-

trustees, executed a mortgage on the Property for $60,000.00 owed by Jasco,

P.C.7 to Tompkins/VIST Bank. On September 14, 2000, John and Kathryn, as

co-trustees, executed another mortgage on the Property, for $40,000.00

owed by Jasco, P.C., to Tompkins/VIST Bank. On December 19, 2001, John

and Kathryn again mortgaged the Property to secure a $100,000.00 line-of-

credit at Tompkins/VIST bank (Tompkins/VIST LOC).

       In 2009, Settlor died.        Her will named John as executor and as a

beneficiary. At the time of her death, the Hatboro Mortgage, in Settlor’s name,

had not been satisfied. On September 8, 2016, John died. Id. at 36. Kathryn

selected IKOR to serve as co-trustee. Kathryn remained in the residence until

on or about December 18, 2016, and her tenancy interest terminated 30 days

later, on or about January 18, 2017.
____________________________________________

6 John and Kathryn each have children from previous relationships. They do
not have any children together. John’s children and Kathryn’s children are,
collectively, referred to as “Remaindermen.”

7Jasco, P.C. is the name of John’s accounting service. N.T. Hearing on
Objections, 11/15/21, at 67 (Kathryn testifying “Jasco was one of [John’s]
many companies.”).

                                           -5-
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       On August 2, 2017, Kathryn filed a First Intermediate Accounting for the

period between May 15, 1998 and August 1, 2017.8 On October 5, 2017, the

Property was sold for $462,500.00. At the time of closing, Kathryn and IKOR

made the following payments from Trust principal:         $88,536.13 on the

Hatboro Mortgage, which included $7,332.35 in late charges accrued during

John’s life tenancy; and $27,017.29 on the Tompkins/VIST LOC. See id. at

47 (Kathryn testifying Hatboro Mortgage balance approximately $7,000.00

higher because “my husband made some late payments”).            Kathryn also

reimbursed herself $4,195.00 for payments she made on the Tompkins/VIST

LOC after she terminated her life tenancy.

       On August 27, 2018, Kathryn and IKOR filed a Second Intermediate

Accounting, to which numerous objections were filed by the Sletten Children,

including, inter alia, a request for surcharges relating to payments made from

Trust funds that were not valid trust obligations and the reasonableness of

Co-Trustee’s request for attorneys’ fees. See Objections, 9/27/2018.

       On November 15-16, 2021, the Orphans’ Court held a hearing at which

Kathryn, Christopher Sletten, and Chad Sletten testified.     Kathryn testified

that she was unaware of any of Tompkins/VIST loans until after John’s death.

Id. at 71 (Kathryn testifying “I did not sign any additional mortgages over the

____________________________________________

8 Sletten Children filed objections to the First Intermediate Accounting.
Therein, they objected to, inter alia, the validity of the May 15, 1998 Trust,
any claimed attorney’s fees or compensation requested by Kathryn, Kathryn’s
appointment of IKOR as co-trustee, and asserted that Kathryn had been
mishandling the sale of the Property. See Objections, 8/17/17.

                                           -6-
J-A01035-23

life of the [Hatboro Mortgage]”). Kathryn also testified that John had told her

he forged her signature on a mortgage and after his death she called the bank

to inquire into the loans. Id. at 70-71 (Kathryn testifying bank told her, “John

used a portion of the [$100,000.00 line-of-credit, the Tomkins/VIST LOC] to

pay off the prior two loans”). Kathryn testified that, rather than confronting

the bank while John was living and endangering John’s accounting business,

their marriage, and their family, she continued making mortgage payments in

order to protect the Trust. Id. at 75.9

       Chad testified that Kathryn had initially denied the existence of the Trust

and that he did not learn about the Trust until the beginning of January 2016.

Id., 11/16/21, at 13, 16. Christopher testified that Kathryn had told him,

“[Kathryn] was going to spend every nickel of the trust . . . she was going to

make sure there was nothing left.” Id. at 11.

       Following the hearing, the Orphans’ Court ordered the following: (1)

Kathryn surcharged for use of Trust funds to pay $7,332.35 of Hatboro

Mortgage late fees; (2) Kathryn and IKOR jointly and severally surcharged for

use of Trust funds to pay $27,017.29 of Tompkins/VIST LOC; (3) Kathryn

surcharged for use of Trust funds to reimburse herself $4,195.00 for her

payments toward Tompkins/VIST LOC she made after moving out of Property;

and (4) distribution of the Trust balance, $379,044.22, as per Trust terms.
____________________________________________

9 Kathryn also testified that she and John purchased a home in Alabama in

2015. On cross-examination, Kathryn conceded that the plan was to sell the
Property and use the proceeds to pay off the loan on the Alabama property.
Kathryn also conceded that this violated the terms of the Trust. Id. at 87.

                                           -7-
J-A01035-23

      Both parties filed timely notices of appeal and court ordered Pa.R.A.P.

1925(b) concise statement of errors complained of on appeal.

      Co-Trustees raise the following questions for our review:

      1. Did the Orphans[’] Court err in surcharging Kathryn [] for the
         late payments on the Hatboro [] Mortgage when the
         [R]emaindermen were responsible for paying the principal on
         the mortgage, and Kathryn [] also was not the life tenant at
         the time late payments were made?

      2. Did the Orphans[’] Court err in surcharging Kathryn [] and
         IKOR for the payoff of the Tomkins/[VIST] mortgage when the
         Trust did not forbid the Trustees from taking out the mortgage,
         the life tenant had power of consumption, and the payments
         on the Hatboro [M]ortgage exceeded the payments on this
         second mortgage?

      3. Did the Orphans[’] Court misapply the law and abuse its
         discretion as a factfinder in calculating the final amount to be
         distributed after applying its surcharges by reaching a figure
         that is $151,509.26 too high?

      4. Did the Orphans[’] Court misapply the law and abuse its
         discretion in disallowing all fees of $70,000.36 payable to
         attorneys representing the Trustees in the course of trust
         administration by failing to follow a reasonableness standard
         and misallocating the burden of proof?

Appellant’s Brief, at 6-7 (reordered).

      The Sletten Children raise the following issues on cross-appeal:

      1. Did the Orphans’ Court err as a matter of law by allowing
         [T]rustees to treat the Hatboro [M]ortgage as a debt of the
         [T]rust instead of imposing a surcharge?

      2. Should beneficiaries be awarded reasonable counsel fees
         against Trustees for filing a frivolous appeal when Trustees
         admitted the Tompkins/VIST Mortgage Loan was not a debt of
         the [T]rust?

Appellees’/Cross-Appellants’ Brief, at 1.

                                     -8-
J-A01035-23

     This Court’s review of an Orphans’ Court’s findings is deferential and will

not be reversed absent an abuse of discretion. Commonwealth v. Warden,

2 A.3d 565, 571 (Pa. Super. 2010). “Our task is to ensure that the record is

free from legal error and to determine if the Orphans’ Court’s findings are

supported by competent and adequate evidence and are not predicated upon

capricious disbelief of competent and credible evidence.” Id., quoting In re

State of Cherwinski, 856 A.2d 165, 167 (Pa. Super. 2000).

     Co-trustee’s first two issues and the Sletten Children’s first issue relate

to surcharges.

     A surcharge is the equitable penalty imposed when a trustee fails
     to exercise the requisite standard of care and the trust suffers
     thereby.     The purpose of a surcharge is to compensate
     beneficiaries for the loss caused by the fiduciary’s want of the
     appropriate level of care. As we stated in Trust of Munro [v.
     Commonwealth National Bank, 541 A.2d 756 (Pa. Super.
     1998),] when determining the proper surcharge to be imposed,
     we are guided by the Restatement (Second) of Trusts. []

        Restatement § 204 provides that a trustee is not liable for a
        loss in value of the trust property or for a failure to make a
        profit that does not result from a breach of trust.
        Conversely, Restatement § 205 provides, “If the trustee
        commits a breach of trust, he is chargeable with[:] (a) any
        loss or depreciation in value of the trust estate resulting
        from the breach of trust; or (b) any profit made by him
        through the breach of trust; or (c) any profit which would
        have accrued to the trust estate if there had been no breach
        of trust.” Comment (a) explains that in choosing among
        these three remedies, the beneficiary has the option of
        pursuing the remedy that will place him in the position in
        which he would have been if the trustee had not committed
        the breach. [Id. at 758.]

                                     -9-
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In re Scheidmantel, 868 A.2d 464, 493 (Pa. Super. 2005). “We believe

that, as between innocent beneficiaries and a defaulting fiduciary, the latter

should bear the risk of uncertainty as to the consequences of its breach of

duty.” Estate of Stetson, 345 A.2d 679, 690 (Pa. 1975).

      Co-Trustees first argue that the Orphans’ Court erred in surcharging

Kathryn for the payment of Hatboro Mortgage late fees in the amount of

$7,332.35. See Appellant’s Brief, at 51. Kathryn claims that, absent a written

agreement, she and John as life tenants had no obligation to make payments

on the Hatboro Mortgage principal, thus, on balance, the Trust did not suffer

an actual loss when Kathryn, in her capacity as trustee, paid the Hatboro

Mortgage late fees from Trust principal. See id. at 52, 54. In the alternative,

Kathryn claims that she should not be responsible for John’s late payments

during his life tenancy. Id. at 55. Finally, Kathryn, citing to 20 Pa.C.S.A. §§

7769(b) and 7780.6(a)(7), requests reimbursement for principal payments

made on the Hatboro Mortgage, as well as the late fee payments due to their

characterization as “trust expenses” for which trustees are entitled to

reimbursement. See id. at 53, 54.

      In surcharging Kathryn for late payments, the Court reasoned that “John

and Kathryn [] were not simply living in the [P]roperty as life tenants, [but

were also] co-trustees who agreed to pay the mortgage in exchange for the

Trust purchasing the Property” and that the “[f]ail[ure] to make timely

mortgage payments resulting in late fees and penalties being charged by the

                                    - 10 -
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bank is a breach of fiduciary duty because it resulted in a loss of value of the

trust asset.” Id. We agree.

      Instantly, Kathryn conceded there was an “understanding” that she and

John, in exchange for living at the Property, were to make monthly Hatboro

Mortgage payments.      N.T. Hearing on Objections, 11/15/21, at 19, 21.

Kathryn testified that John and Kathryn’s Hatboro Mortgage payments began

on September 1, 1995, immediately after the note and mortgage were

executed, and that Settlor and Warren never made mortgage payments. Id.

at 25. Transfer of the Property to the Trust did not change this agreement as

indicated, by John and Kathryn’s continued mortgage payments subsequent

to transfer.

      In light of the foregoing, Kathryn’s claim that she and John, as life

tenants, had no obligation to the pay the Hatboro Mortgage is belied by the

record.

      Furthermore, Kathryn confuses her burden to prove a defense regarding

surcharges. See In re Dentler Family Trust, 873 A.2d 738, 746 (Pa. Super.

2005) (where objectors initially prove breach of fiduciary duty, trustee’s

burden is to show loss would have occurred in absence of breach of duty,

rather than that trustee conduct increased trust funds generally).        Here,

Kathryn makes no claim that late fees would have accrued in the absence of

a breach of fiduciary duty.

      Additionally, Kathryn’s attempt to create a distinction between John’s

life tenancy and her responsibilities as either life tenant or trustee is

                                     - 11 -
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unavailing. Kathryn, as co-trustee with John, had a fiduciary duty to ensure

that the mortgage payments were timely made. See In re Dentler Family

Trust, supra, at 746 (affirming trustees’ late payment surcharge where

trustees failed to timely pay trust’s income and inheritance taxes). Moreover,

although Kathryn’s life tenancy could not have begun until John’s terminated,

the record shows that the aforementioned “understanding” regarding Hatboro

Mortgage payments included both John and Kathryn.          Further, John and

Kathryn moved into the house together and made mortgage payments

together. N.T. Hearing on Objections, 11/15/21, at 16 (Kathryn testifying

she and John moved into Property in July 1995); id. at 27 (Kathryn testifying

“we made all of the payments”); id. (Kathryn testifying “whenever [the

payments] were started, we made them”). Accordingly, Kathryn’s claim that

she had no obligation in regard to these payments is specious.

      Kathryn’s request for reimbursement regarding Hatboro Mortgage

payments pursuant to 20 Pa.C.S.A. §§ 7769(b) and 7780.6(a)(7) is also

meritless. See 20 Pa.C.S.A. § 7769(b) (when trustee advances money for

protection of trust, trustee entitled to lien on trust to secure reimbursement

with reasonable interest); see id. at § 7780.6(a)(7) (trustee has lien on trust

assets as against beneficiary when trustee advances money for protection

of trust and for all expenses, losses and liability sustained in trust

administration of holding or ownership of trust assets).         Instantly, as

discussed, supra, Kathryn and John were responsible for monthly mortgage

payments and, thus, reimbursement is not warranted. Additionally, regarding

                                    - 12 -
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late fee payments, Kathryn satisfied the late fee payments using trust

principal.       Kathryn did not advance her own money.              Thus, the

aforementioned statutes provide her no relief.

      In light of the foregoing, the Orphans’ Court did not err in surcharging

Kathryn for the late payments that accrued on the Hatboro Mortgage while

she was trustee and her payment of the same using Trust proceeds.

      The Sletten Children’s first claim asserts that the entire remainder of

the Hatboro Mortgage, $88,536.13, should be surcharged because John and

Kathryn’s agreement to pay the Hatboro Mortgage pre-dated the creation of

the Trust. They also argue that because the note secured by a mortgage on

the Property is in Settlor’s name, it was never a debt of the Trust but, rather,

a debt of Settlor’s estate, which John should have paid in his capacity as

executor of Settlor’s will. See Sletten Childrens’ Brief, at 28-31; see N.T.

Hearing on Objections, 11/15/21, at 53 (Sletten Children’s attorney proceeds

under theory that because Hatboro Mortgage note was signed by Warren and

Settlor, note should have been paid by Settlor’s estate).

      Upon review of the record, we find this claim waived. In the Sletten

Children’s First Objection, they conceded that the Hatboro Mortgage should

be paid by the Trust. Sletten Children First Objection, 8/31/17, at ¶ 27 (“[t]he

[Property] should be sold and proceeds distributed to the [beneficiaries]

following the payoff of the Hatboro [M]ortgage.”).              In the Sletten

Children’s Second Objection, they only requested surcharges in the amount of

the late fees.    Sletten Children Second Objection, 9/27/18, at ¶ 3 (“The

                                     - 13 -
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balance at [Property] settlement on October 10, 2017, per the amortization

should have been $81,203.78[,] and not $88,536.18. The Trustees should be

surcharged for the payoff amount of $7,332.35 incurred because of their

failure to pay the loan on a timely basis.”).

        Next, Co-Trustees argue that the Orphans’ Court erred in surcharging

them for Tompkins/VIST mortgage payments from Trust funds.               See

Appellants’ Brief, at 56. Co-Trustees first claim that, although John was not

permitted to execute a mortgage on the Property as a life tenant, John and

Kathryn were permitted to do so when acting jointly as co-trustees. Id. Co-

Trustees also assert that it is “unclear” how John would have been able to

receive income or principal distributions for his “well-being” and “beneficial

enjoyment” without mortgaging the Property.        See id. at 57-58. Further,

Kathryn claims there is no evidence of self-dealing because she did not

personally receive proceeds of the Tompkins/VIST Mortgage, id. at 62, and

that John executed the Mortgage without her knowledge by forging her

signature on the bank documents. Id. at 60. Furthermore, IKOR claims its

connection to the payments is “attenuated” because no IKOR representative

lived in the Property or received mortgage or real estate proceeds. Id. at

63.10

____________________________________________

10 Co-Trustees again claim that there was no actual loss to the Trust because

the Tompkins/VIST mortgage payments were less than the payments made
toward Hatboro Mortgage principal. Id. at 56. However, as discussed supra,
John and Kathryn’s payments on the Hatboro Mortgage were required and
(Footnote Continued Next Page)

                                          - 14 -
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       The Orphans’ Court determined that, pursuant to 20 Pa.C.S.A. §

7504(a)(1)-(2), Kathryn committed a breach of fiduciary duty insofar as she

reimbursed herself for the amount owed on a mortgage or alienation of

property that was forbidden by the express terms of Article III of the Trust

and IKOR is liable inasmuch as it acquiesced in the improper use of trust funds.

See Adjudication, 10/17/21, at 8. We agree.

       In Kenworthy v. Levi, 63 A. 690 (Pa. 1906), our Supreme Court

determined that a power given to a trustee to sell generally includes a power

to mortgage, but a proviso against encumbering the estate amounts to a

prohibition against mortgaging it. Id. at 691. Instantly, Article VIII of the

Trust provides John and Kathryn as co-trustees the power to sell the Property.

However, Article III of the Trust expressly prohibits John, as a life tenant,

from mortgaging the residence.                 See Trust Article III (“under no

circumstances shall [John] mortgage, encumber, alienate, or in any way

transfer or assign his beneficial life interest or any rights therein tantamount

to ownership in such real estate.”). This language is “clear and articulate.”

In re Estate of Loucks, 148 A.3d 780, 782 (Pa. Super. 2016). Because John

is both a trustee with a power to sell and a life tenant prohibited from

encumbering the property, to permit John to mortgage the Property in any

capacity would conflict with Settlor’s explicitly stated intent to prohibit John

____________________________________________

cannot act to counter the Tompkins/VIST LOC payment made from trust
funds. See supra, Appellant’s Issue one.

                                          - 15 -
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from exercising privileges tantamount to ownership. Id. at 782 (“the pole

star in every trust . . . is the settlor’s intent and that intent must prevail”)

(citation omitted). Accordingly, because both Kathryn and John were needed

to conduct business of the Trust and John was not permitted to mortgage the

Property, the Tompkins/VIST mortgage is not a valid debt of the trust. Thus,

Kathryn was prohibited from using Trust funds to pay its remaining balance.

      Next, Co-Trustees claim that the only way to create Trust income to

provide for John’s “well-being” and “beneficial enjoyment” was to execute a

mortgage.   Appellant’s Brief, at 58.   This argument is essentially that the

mortgages were proper distributions to John. However, John and Kathryn, as

co-trustees, were provided the power to lease the Property, thus, giving them

the option to create rental income. See Trust, Article VIII. Accordingly, this

claim provides them no relief.

      Further, Kathryn’s claim that she did not personally receive proceeds of

the Tompkins/VIST Mortgage is of no moment. A trustee has a duty to adhere

to the terms of the trust. See 20 Pa.C.S.A. § 7771 (“Upon acceptance of the

trusteeship, the trustee shall administer the trust in good faith, in accordance

with its provisions and purposes[.]”). Here, Kathryn breached that duty when

she and John executed a line-of-credit backed by a mortgage on the Property,

which was used to pay back two previous mortgages also improperly executed

on the Property at Tomkins/VIST Bank.         See N.T. Hearing on Objections,

11/15/21, at 71.

                                     - 16 -
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      IKOR’s claim that its connection is too far removed for them to be at

fault is meritless. Pursuant to 20 Pa.C.S.A. § 7773(g), “Each trustee shall

exercise reasonable care to: (1) prevent a co[-]trustee from committing a

breach of trust involving fraud or self-dealing; and (2) compel a co[-]trustee

to redress a breach of trust involving fraud or self-dealing.” Because IKOR

acquiesced in the use of Trust principal to pay the reminder of this mortgage,

it breached its duty of reasonable care and, thus, is equally liable.

      Further, Kathryn’s assertion that she did not know the Property had

been mortgaged because John forged her signature affords her no relief.

Kathryn conceded she knew John forged her signature on a mortgage before

he died. Id. at 71 (Kathryn testifying after John’s death “I wanted to know

what [John] had done with a mortgage he had taken out using my forged

signature, because he acknowledged that to me”). Kathryn also knew that

both her and John’s signatures were needed to conduct trust business. Under

these circumstances, Kathryn should have contacted the bank immediately to

inform herself about the circumstances of the mortgage and, thus, breached

her duty of reasonable care by failing to do so.         This delay prevented

immediate redress of John’s breach of trust, see 20 Pa.C.S.A. § 7773(g)(2),

and protected only John’s accounting business.

      When Kathryn and IKOR used Trust funds to pay back a forbidden line-

of-credit, this resulted in a loss to the Trust.

                                      - 17 -
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     In light of the foregoing, the Orphans’ Court did not abuse its discretion

in surcharging Kathryn and IKOR for payment of the Tomkins/VIST LOC. See

Warden, supra.

     Next, Co-Trustees argue that the trial court’s calculation of the final

amount to be distributed is $151,509.26 too high. See Appellant’s Brief, at

33. They claim the Orphans’ Court either made an unexplained mathematical

error or double counted the surcharges as well as an income tax payment,

and omitted an income tax payment to which the Sletten Children’s objection

was withdrawn. Id.

     The Orphans’ Court listed items which it believed were legitimate

deductions of the Property’s sale price of $462,500.00 and ultimately

determined that $379,044.22 remained to be distributed. Those legitimate

deductions are as follows:

     Hatboro Mortgage Fees (less late payments):            $ 81,203.78
     Accurate Radon Control:                                $ 925.00
     Anthony Maletto:                                       $ 125.00
     Associates Group Abstract, Inc. Courier FedEx:         $ 25.00
     Associates Group Abstract, Inc.
     Tax Certification Reimbursement:                       $ 55.00
     Associates Group Abstract, Inc. Escrow Fee:            $ 22.50
     FedEx:                                                 $ 50.00
     John Colbridge – Lawn Services prior to closing:       $ 780.00
     Juliet Scavello:                                       $ 3,500.00
     KJS Flight:                                            $ 662.80
     KJS Hotel:                                             $ 16.62
     KJS Hotel:                                             $ 109.17
     Stanley Steamer:                                       $ 700.66
     Maletto Repairs:                                       $ 1,800.00
     Mont. Co. Sewer:                                       $ 127.13
     Water:                                                 $ 449.60
     Re/Max Centre Broker Commission:                       $ 20,812.50

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       Re/Max Centre Settlement:                              $ 135.00
       ReQuire Inc.:                                          $ 70.00
       TCB Closing – Notary:                                  $ 20.00
       TCB Closing – Deed:                                    $ 75.00
       Hall, Albright, Garrison & Barnes (Accounting firm):   $ 757.00
       CPA fee:                                               $ 80.00
       Homeowners, Inc.                                       $ 2,141.30
       PECO:                                                  $ 1,988.96
       Water (NWWA):                                          $ 134.[2]6
       [Horizon] Waste:                                       $ 252.00
       Yard:                                                  $ 30.00
       Four Flag Repairs:                                     $ 3,495.00
       Correspondence:                                        $ 22.95
       MTMSA Sewer:                                           $ 407.23
       Castella Lawn Servicie:                                $ 700.00
       PA DOR Transfer Tax:                                   $ 4,625.00
       Fiduciary Income Tax:                                  $ 2,252.00

Trial Court Opinion, 3/30/22, at 7-8.

       However, upon recalculating this list of “legitimate deductions” we find

the total to be $128,549.96. Accordingly, pursuant to this list, the amount

remaining to be distributed should be $333,950.04, not $379,044.22. We find

further error in that the Orphans’ Court neither included the following in

legitimate expenses nor surcharged Kathryn and/or IKOR for the same:

   •   $350.00 to Marc Bootel for Property appraisal (date: 8/24/18).
   •   $150.00 to Anthony Maletto (date: 10/10/17).
   •   $16,501.55 to Hatboro Mortgage after Kathryn no longer resided in
       Property (date: 8/24/18).
   •   $14,144.00 to United States Treasury (date: 4/17/18).

See Second Accounting, 8/28/18.

       In light of the foregoing, we remand for the Orphans’ Court to clarify

the amount remaining for distribution.

       Finally, Co-Trustees appeal the denial of attorneys’ fees and the Sletten

Children request that this Court award sanctions, in the form of attorneys’

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fees, for defending this “frivolous” appeal. It is well settled that “[t]he fixing

of fees for services of counsel in the settlement of an estate, or other matter

under the eye of the court, rests largely in the judgment of the court below,

and its decision will not ordinarily be disturbed on appeal.” In re Berkowitz’s

Estate, 26 A.2d 295, 295 (Pa. 1942).

      Co-Trustees claim that the Orphans’ Court misapplied the law when it

failed to follow the reasonableness standard for attorneys’ fees and incorrectly

allocated the burden of proof to the Co-Trustees. See Appellant’s Brief, at

38.   Co-Trustees also assert that the Orphans’ Court ignored evidence of

record, including 35 pages of invoices showing a total of $70,000.36 in fees

earned.   Id. at 39.     They assert that administrative work necessitates

attorneys’ fees and that the Orphans’ Court was incorrect in its determination

that the invoices were unclear as to what period of time they covered because

the invoices are dated, include a description of the services performed, the

time spent and hourly rate, and the balance due. Id. at 45. Additionally, Co-

trustees claim that the invoices matched the court’s docket and it is unclear

why the court only reviewed the reconciliation page, summarizing the fee

invoices. Id.

      The Orphans’ Court denied Kathryn/Co-trustee’s request for attorneys’

fees, concluding the fees were unreasonable where they were incurred in

connection with her breach of fiduciary duty and that it “could not discern

what billings [from Montco Elder Law] were attributable to the breach of

fiduciary duty on the Tompkins/VIST LOC, as opposed to the other necessary

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aspects of trust administration.” Orphans’ Court Opinion, 3/30/22, at 14-15,

19. We agree.

      Pursuant to 20 Pa.C.S.A. § 7769, a trustee is entitled to reimbursement

from trust property for expenses properly incurred in trust administration.

See id. See also id. at § 7775 (“in administering a trust, the trustee may

incur costs that are reasonable in relation to the trust property, the purposes

of the trust[,] and the skills of the trustee.”). Additionally, “[r]eimbursement

under [section 7769] may include attorney’s fees and expenses incurred by

the trustee in defending an action. However, a trustee is not ordinarily entitled

to attorney[s’] fees and expenses if it is determined that the trustee breached

the trust.” See id. at § 7769, comment. See also Lessig. v. Natl. Iron

Bank of Pottstown, 20 A.2d 206, 207 (Pa. 1941) (trustee not entitled to

reimbursement where trustee’s wrongdoing necessitates the incurring of

attorneys’ fees).

      Additionally, “[a]ttorneys . . . seeking compensation from an estate

have the burden of establishing facts which show the reasonableness of their

fees and entitlement to the compensation claimed.” In re Estate of Rees,

625 A.2d 1203, 1206 (Pa. Super. 1993). In determining whether a proposed

fee is fair and reasonable, the Orphans’ Court shall consider the following facts

and factors:

      The amount of work performed; the character of the services
      rendered; the difficulty of the problems involved; the importance
      of the litigation; the amount of money or value of the property in
      question; the degree of responsibility incurred; whether the fund
      involved was ‘created’ by the attorney; the professional skill and

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      standing of the attorney in his profession; the results he was able
      to obtain; the ability of the client to pay a reasonable fee for the
      services rendered; and, very importantly, the amount of money
      or the value of the property in question.

In re LaRocca’s Trust Estate, 246 A.2d 337 (Pa. 1968).

      Instantly, Kathryn hired Montco Elder Law as counsel when the Sletten

Children first challenged the Trust. N.T. Hearing on Objections, supra at 165.

During Montco Elder Law’s representation, which included preparing both

accountings, the previous appeal at docket 2289 EDA 2018, and this appeal,

they accumulated approximately $70,000.00 in legal fees. Montco Elder Law

also communicated with remainder beneficiaries and responded to their

document requests. Id. at 166. Kathryn and Montco Elder Law submitted

invoices showing attorney time entries. See Exhibit H.

      However, Montco Elder Law’s invoices date back to March 20, 2017 and

each entry contains only a brief and broad description of the work performed,

lacking sufficient detail to allow the court to determine whether the work

performed was valid trust administrative work or work related to defending

Kathryn’s position regarding the invalid mortgages. Further, at the hearing in

this matter, Co-trustees provided minimal testimony in support of their fee

request and failed to provide the Orphans’ Court with information to determine

whether the fees were reasonable under the LaRocca factors.           Kathryn’s

testimony as to fees was minimal and vague, see N.T. Hearing on Objections,

11/15/21, at 165-85, and no testimony from counsel was presented. Because

it is not the Orphans’ Court’s obligation to comb the record in an attempt to

ascertain which time entries are properly chargeable to the Trust, or to sua

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sponte illicit testimony regarding the basis for and reasonableness of fees, we

are constrained to conclude that the Co-Trustees have failed to meet their

burden of proof, Rees, supra, and thus, the Orphans’ Court did not err in

denying their request for attorneys’ fees.

      Kathryn also claims she received legal advice from Attorney Richard

Magee and that he is owed $1,000.00 in legal fees.                However, no

documentation of the work he performed, or the fee structure agreed to, was

submitted into evidence.     The only record document related to Attorney

Magee’s representation is an e-mail from Attorney Magee to Kathryn stating

that he is no longer able to represent her. See Exhibit K.

      The trial court did not abuse its discretion in denying payment of a

$1,000.00 fee owed to Attorney Magee, as there is no invoice provided in the

certified record. Further, and most importantly, Attorney Magee’s legal advice

consisted of telling Kathryn that she was not permitted to use proceeds from

the sale of the house for her own benefit (to pay off the mortgage on her

home in Alabama). See N.T. Hearing on Objections, 11/15/21, at 162-63.

The trust provided no semblance of ownership in the Property to Kathryn and

the advice of counsel was unnecessary to enable her to reach the conclusion

that she was not entitled to the proceeds of the sale of the Trust corpus.

      In their cross appeal, the Sletten Children claim they are entitled to

attorneys’   fees because    Co-Trustees filed    a frivolous appeal.        See

Appellees’/Cross-Appellants’ Brief, at 32. Pursuant to Pa.R.A.P. 2744, if an

appellate court “determines that an appeal is frivolous or taken solely for delay

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or that the conduct of the participant against whom costs are to be imposed

is dilatory, obdurate[,] or vexatious” then an appellate court may award

attorneys’ fees as may be just, including damages for delay at the rate of 6%

per annum in addition to legal interest.

      In determining the propriety of such an award, we are ever guided
      by the principle that an appeal is not frivolous simply because it
      lacks merit. Rather, it must be found that the appeal has no basis
      in law or fact. This high standard is imposed in order to avoid
      discouraging litigants from bringing appeals for fear of being
      wrongfully sanctioned.

Menna v. St. Agnes Medical Center, 690 A.2d 299, 304 (Pa. Super. 1997).

Where fees are requested, the proper procedure is for this Court to remand

the matter to the trial court for the determination as to the appropriate

sanction. See Pa.R.A.P. 2774.

      Instantly, the Sletten Children assert that Co-Trustees conceded that

the Tompkins/VIST LOC is not a valid trust debt in an e-mail sent to

Tomkins/VIST Bank, and, thus, Co-Trustees’ appeal is frivolous. See Exhibit

J (September 29, 2017 e-mail from Montco Elder Law to Tomkins/VIST bank

asserting because John forged Kathryn’s signature on the document, the

mortgage is invalid). The Sletten Children also claim the appeal is frivolous

because, if the Tomkins/VIST mortgages were truly distributions to John, they

should have been included in the accounting as such.        See id. at 33-34

(Sletten Children asserting “it is obvious that [Co-]Trustees invented the

supposed ‘offsets’ and ‘distributions’ in an attempt to avoid [already imposed]

surcharges[.]”). We disagree.

                                    - 24 -
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      In the September 28, 2017 e-mail, Co-Trustees attempt to demonstrate

to Tomkins/VIST bank that the Tomkins/VIST LOC is invalid due to

Kathryn’s forged signature. The fact that Co-Trustees later made this same

claim to the court does not render Co-Trustees’ appeal frivolous. To conclude

otherwise would make the bank, rather than the court, the final arbiter.

Additionally, Co-Trustees failure to include the Tompkins/VIST LOC as

distributions to John in the accountings, does not conclusively show that the

mortgage was not an attempt at providing John income. Co-Trustees’ claim,

although meritless, is an attempt to use the facts at issue to demonstrate that

the Orphans’ Court determination was incorrect, which is the purpose of an

appeal.

      Furthermore, on appeal, Co-Trustees not only raised issues regarding

the Tompkins/VIST LOC, but also: (1) asserted that the Hatboro Mortgage

surcharge was in error; (2) requested attorney’s fees stemming from earlier

Trust litigation in which they prevailed; and (3) successfully argued that the

Orphans’ Court miscalculated “legitimate deductions,” and consequently,

misstated the amount available for distribution. Accordingly, the appeal was

not frivolous and the Sletten Children’s request for sanctions is denied.

      Orders affirmed in part and reversed in part. Case remanded for further

proceedings to determine the monetary amounts to be distributed to

beneficiaries. Jurisdiction relinquished.

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 9/27/2023

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