Court Opinion

ID: 4098552
Source: CourtListenerOpinion
Date Created: 2016-11-16 04:23:11.2875+00
Date Added: 2024-06-11T14:45:27.031135
License: Public Domain

J-A13014-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

IN RE: ESTATE OF EDWARD L. IRWIN,             IN THE SUPERIOR COURT OF
JR., ALSO KNOWN AS EDWARD L. IRWIN                  PENNSYLVANIA

APPEAL OF: ROXANNE ROTHBERGER

                                                  No. 1125 WDA 2015

                Appeal from the Order Entered June 5, 2015
            In the Court of Common Pleas of Allegheny County
                   Orphans' Court at No(s): 2003 of 2013

BEFORE: OLSON, STABILE AND MUSMANNO, JJ.:

MEMORANDUM BY OLSON, J.:                     FILED NOVEMBER 15, 2016

     Roxanne Rothberger (Daughter), as trustee for the Edward L. Irwin

Special Needs Trust (the Trust), appeals from the June 5, 2015 order

terminating the Trust.1   In this case, we are presented with the limited

question of whether a trust established pursuant to 20 Pa.C.S.A. § 5602

terminates automatically upon the principal’s death.       The trial court

concluded that, based upon the language of the Trust instrument, the Trust

terminated automatically upon Edward L. Irwin Jr.’s (Decedent’s) death. Our

review of the Trust instrument reveals this conclusion was in error.

Nonetheless, we conclude, for the reasons set forth below, that a section

1
 The June 5, 2015 order became final on June 29, 2015 when the trial court
denied Daughter’s exceptions.
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5602 trust automatically terminates upon the principal’s death.2            Our

disposition of this limited issue doesn’t fully resolve this litigation because

whether a trustee maintains authority under the Uniform Trust Act, 20

2
  Throughout the briefing in this case, the parties conflate a special needs
trust with a trust established under section 5602. As the Supreme Court of
New Jersey explained:

      A special needs trust is a trust that is intended to allow a
      disabled individual to maintain eligibility for certain needs-based
      government benefits. The use of special needs trusts to protect
      eligibility for government benefits was first authorized by
      Congress when it passed the federal Omnibus Budget
      Reconciliation Act of 1993 (OBRA ′93). OBRA ′93 identified
      certain types of trusts into which disabled individuals, or persons
      acting on behalf of such individuals, can place assets without
      those assets becoming available assets for purposes of
      determining Medicaid eligibility. One such trust is what is known
      as a special needs trust. See 42 U.S.C. § 1396p(d)(4)(A). In
      1999, Congress extended the protections afforded by the use of
      a special needs trust, finding that the contents of that type of
      trust are not considered resources or assets for purposes of
      determining eligibility for S[upplemental Security Income].

J.B. v. W.B., 73 A.3d 405, 414 (N.J. 2013) (internal quotation marks,
footnote, and certain internal citations omitted).

A trust created pursuant to section 5602, on the other hand, is a trust
created by an agent pursuant to a power-of-attorney executed by the
principal. Only a very small subset of section 5602 trusts are also special
needs trusts. Cf. 42 U.S.C. § 1396p(d)(4)(A) (a special needs trust must be
formed by a “parent, grandparent, legal guardian of the individual, or a
court” and the principal must be under 65 years old).

In this case, Decedent was over 65 years old when the Trust was created.
Thus, it failed to satisfy the requirements for a special needs trust. See In
re Pooled Advocate Trust, 813 N.W.2d 130, 142 (S.D. 2012). In order to
avoid confusion, we do not use the (incorrect) terminology used by the
parties. Instead, we refer to the Trust at issue herein as a section 5602
trust.

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Pa.C.S.A. § 7701 et seq. (which governs the administration of an express

trust like the one at issue in this case), is a separate and distinct issue from

whether the section 5602 trust terminates upon the principal’s death.

Accordingly, we affirm the trial court’s order terminating the Trust and

remand for further proceedings consistent with this memorandum.

      The factual background and procedural history of this case is as

follows. On May 5, 2009, Decedent executed a financial power-of-attorney

and named one of his sons, Edward L. Irwin, III (Edward), as his agent.

Decedent named another son, David Irwin (David), as his successor agent.

Eventually, Daughter, Edward, and David engaged in litigation relating to

how Edward and David exercised the power-of-attorney.              The parties

ultimately settled their dispute by establishing the Trust for Decedent’s

benefit.   The Orphans’ Court of Allegheny County approved the parties’

settlement and the creation of the Trust.      The Trust was funded by two

demand notes – one signed by Edward and one signed by David.3 Robert

Lemons (Lemons), the Trust’s original trustee, did not immediately collect on

the demand notes.

3
  Edward’s demand note was for $15,000.00 at an annual interest rate of
0.22% while David’s demand note was for $60,000.00 at an annual interest
rate of 0.22%. Both demand notes were payable upon demand of the
trustee during Decedent’s lifetime and became immediately payable upon
Decedent’s death. Furthermore, both demand notes included provisions
permitting the trustee to confess judgment on the demand notes.

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     On March 14, 2013, Decedent died.       On April 2, 2013, prior to the

issuance of letters testamentary, Lemons, on behalf of the Trust, filed a

complaint seeking confession of judgment against David.       Judgment was

entered against David, and in favor of the Trust.         Thereafter, letters

testamentary were issued naming Edward as executor of Decedent’s estate.

On April 5, 2013, Edward and Lemons entered into an agreement in which

Edward agreed to pay $15,012.03 to the Trust on or before April 10, 2013 to

satisfy Edward’s demand note.    Edward also agreed to pay $68,885.92 of

David’s inheritance directly to the Trust in order to satisfy the judgment

entered against David. Despite these arrangements, Edward did not make

the payments required by the April 5 arrangement.

     On January 13, 2014, Edward and Lemons entered into an agreement

whereby Lemons agreed to accept a payment of $2,500.00 in order to fully

satisfy Edward’s obligation to the Trust. Lemons also “agree[d] to enter into

a settlement agreement with the Estate and the beneficiaries of the Estate

and the Trust, in lieu of the formal administration of the Trust and a First

and Final Account submitted to the Court on the Trust’s behalf.” Daughter’s

Proposed Findings of Fact and Conclusions of Law, 3/30/15, at Ex. 6.

     Immediately after signing the January 13 agreement, Lemons resigned

as trustee and Daughter was appointed as successor trustee.      On October

14, 2014, Daughter served David with a notice of intent to execute on the

confessed judgment. On November 17, 2014, David filed a petition seeking

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to strike or open the confessed judgment. Daughter filed an answer to the

petition which included new matter. On December 23, 2014, David filed a

petition to terminate the Trust. On June 5, 2015, the trial court entered an

order terminating the Trust and staying further proceedings relating to the

execution. Daughter filed exceptions which were denied on June 29, 2015.

This timely appeal followed.4

      Daughter presents one issue for our review:

      Whether the [trial] court committed an error in law and abused
      [its] discretion by terminating [the] Trust based upon findings of
      fact that were unsupported by substantial evidence, by relying
      upon language that cannot be found in the [document creating
      the] Trust and in effect directing the distribution of Trust assets
      in violation of both the Trust language and the applicable law?

Daughter’s Brief at 4.

      Daughter’s lone issue on appeal requires us to interpret the instrument

used to create the Trust.    Our standard of review of a trial court’s order

interpreting a trust instrument is de novo and our scope of review is plenary.

See Scalfaro v. Rudloff, 934 A.2d 1254, 1257 n.2 (Pa. 2007) (citation

omitted). As this Court has stated:

      When interpreting a trust instrument, the intent of the settlor is
      paramount and if that intent is not unlawful, it must prevail. To
      ascertain this intent, a court must examine the language of the
      document, the scheme of distribution, and the facts and the
      circumstances existing at the creation of the trust. The settlor’s
      intent must be determined with such reasonable certainty that
      little doubt exists of this intent. If the settlor’s intent remains

4
  The trial court did not order Daughter to file a concise statement of errors
complained of on appeal. See Pa.R.A.P. 1925(b).

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      uncertain, a court turns to canons of construction to supply the
      settlor’s likely intent.

Trust Agreement of Cyrus D. Jones Dated June 24, 1926, 607 A.2d

265, 268 (Pa. Super. 1992) (citations omitted).

      The trial court found that pursuant to the express language of the

Trust instrument, the Trust terminated immediately upon Decedent’s death.

The portion of the Trust instrument relied upon by the trial court states:

                          Paragraph VI Termination

      A. Beneficiary’s Death: Upon [Decedent’s] death, the Trustee
      may pay any death taxes due by reason of [Decedent’s] death
      regarding assets passing in accordance with the provisions
      contained in this Agreement or otherwise, and all expenses of
      her [sic] last illness, funeral and burial, and expenses related to
      administration and distribution of the Trust Estate, if, in the
      Trustee’s sole and absolute discretion, other provisions have not
      been made for the payment of such expenses.

      The Trustee is hereby authorized to make all decisions necessary
      for and incident to the removal, transportation, and disposition
      of [Decedent’s] remains and the performance of a funeral or
      memorial service, after consulting with other members of the
      family.

      The Trustee shall make no payments for expenses incurred prior
      to [Decedent’s] death if the Trustee shall determine, in said
      Trustee’s sole and absolute discretion, that payment therefore is
      the obligation of any county, state, federal or other
      governmental agency which has a legal responsibility to serve
      persons with disabilities which are the same or similar to
      [Decedent’s].

      Upon termination of this Special Needs Trust due to [Decedent’s]
      death, the Trustee shall distribute the remaining Trust Estate to
      [Edward, David, Daughter,] John Paul Irwin, Edythe Irwin, and
      Margaret Sympson, in equal shares, per stirpes.

David’s Petition to Terminate the Trust, 12/23/14, at Ex. B.

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      The trial court apparently relied upon the sentence that states, “Upon

termination of this Special Needs Trust due to [Decedent’s] death . . .” in

determining that the Trust terminated immediately upon Decedent’s death.

The trial court’s reading fails to consider the remainder of the section on

termination of the Trust. Specifically, the first paragraph states that upon

Decedent’s death the trustee is authorized to pay death taxes. It would not

be possible for the trustee to use trust assets to satisfy death taxes if the

Trust terminated immediately upon Decedent’s death.5 Therefore, the plain

language of the Trust instrument indicates that the Trust was not intended

to terminate upon Decedent’s death.

      Not only does the plain language of the Trust instrument refute the

trial court’s conclusion, the facts and circumstances existing at the creation

of the Trust support a finding that the Trust was not meant to terminate

upon Decedent’s death.     As noted above, the demand notes signed by

Edward and David, which funded the Trust, were executed together with the

Trust instrument in order to resolve pending litigation. Thus, they are key

5
  Pursuant to section 5603, “upon the principal’s death, any remaining
balance of corpus and unexpended income of the trust shall be distributed to
the deceased principal’s estate.” 20 Pa.C.S.A. § 5603(b)(1). In this case,
the Trust instrument provided that, upon Decedent’s death, the trustee
expend the corpus and unexpended income for: (1) payment of trust
expenses; (2) payment of funeral expenses; (3) payment of costs associated
with Decedent’s last illness; and (4) payment of death taxes. At least some
of these expenses may be paid from the Trust’s corpus and income after the
Trust terminates pursuant to the Uniform Trust Act. Cf. 20 Pa.C.S.A.
§ 7780.7 (permitting a trustee to withhold from a trust distribution a
reasonable reserve for the payment of expenses and debts).

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facts and circumstances evidencing the Trust’s purpose.        Although the

demand notes signed by Edward and David were payable at any time, they

provided that, upon Decedent’s death, the notes would be immediately

payable to the Trust.   David’s Petition to Terminate the Trust, 12/23/14, at

Ex. C.   Such a provision would not make sense if the Trust terminated

immediately upon Decedent’s death. Thus, based upon the plain language

of the Trust instrument and the surrounding facts and circumstances at the

time the Trust instrument was executed, we conclude that the trial court

incorrectly relied upon the plain terms of the Trust instrument in concluding

that the Trust terminated upon Decedent’s death.

     Having determined that the trial court erred in finding that the plain

language of the Trust instrument terminated the Trust upon Decedent’s

death, we turn to David’s argument that the Trust terminated as a matter of

law pursuant to 20 Pa.C.S.A. § 5603(b)(1).6 As this requires us to interpret

a statute, we are guided by the Statutory Construction Act, 1 Pa.C.S.A.

§ 1501 et seq.     See Pennsylvania Pub. Util. Comm'n v. Andrew

Seder/The Times Leader, 139 A.3d 165, 172 (Pa. 2016) (citation

omitted).   “The object of all statutory interpretation is to ascertain and

6
  Daughter waived any argument that David’s request for approval of the
Trust and its terms before the Orphans’ Court (when resolving the litigation
relating to Edward and David’s use of the power-of-attorney) judicially
estops him from advancing this position. See Westfield Ins. Co. v. Astra
Foods Inc., 134 A.3d 1045, 1051 (Pa. Super. 2016) (a party may waive a
judicial estoppel argument); Pa.R.A.P. 302(a), 2119(a).

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effectuate the intention of the General Assembly while also construing each

statute to give effect to all of its provisions.”     Conestoga Bank v. Tioga

Investments II, 138 A.3d 652, 656–657 (Pa. Super. 2016).                   “The best

indication   of   this   intent   is   the   plain   language   of   the   statute.”

Commonwealth v. Schley, 136 A.3d 511, 516 (Pa. Super. 2016) (citation

omitted).

      Section 5603 provides, in relevant part:

      A power “to create a trust for my benefit” shall mean that the
      agent may execute a deed of trust, designating one or more
      persons (including the agent) as original or successor trustees
      and transfer to the trust any or all property owned by the
      principal as the agent may decide, subject to the following
      conditions:

      (1) The income and corpus of the trust shall either be
      distributable to the principal or to the guardian of his estate, or
      be applied for the principal’s benefit, and upon the principal’s
      death, any remaining balance of corpus and unexpended income
      of the trust shall be distributed to the deceased principal’s
      estate.

20 Pa.C.S.A. § 5603(b). David argues that, pursuant to this provision, any

trust created by a power-of-attorney immediately terminates upon the

principal’s death.

      We conclude that David’s interpretation of section 5603 has merit.

The structure of subsection (b)(1) indicates that the trust terminates upon

the principal’s death. Specifically, the first portion of that subsection states

that during the principal’s lifetime “[t]he income and corpus of the trust shall

either be distributable to the principal or to the guardian of his estate, or be

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applied for the principal’s benefit.” 20 Pa.C.S.A. § 5603(b)(1). The second

portion of that subsection provides that “upon the principal’s death, any

remaining balance of corpus and unexpended income of the trust shall be

distributed to the deceased principal’s estate.” Id. Taken together, the fact

that the trust’s corpus and income must be used for the principal’s benefit,

and upon the principal’s death it must be distributed to the principal’s estate,

indicates that there is no purpose for a section 5602 trust once the principal

dies.

        Moreover, under the cannon of expressio unius est exclusio alterius,

“where certain things are designated in a statute, all omissions should be

understood as exclusions.”    Commonwealth v. Richards, 128 A.3d 786,

789 (Pa. Super. 2015). In this case, the statute states that a section 5602

trust’s corpus and income be disposed of in a specific manner upon the

principal’s death, i.e., it is to be distributed to the principal’s estate. Thus,

other uses which are omitted from this portion of subsection (b)(1) are to be

understood as excluded, i.e., using the trust’s corpus and income to pay

death taxes.    Under the Uniform Trust Act, a trust terminates automatically

“once no purpose of the trust remains to be achieved[.]”           20 Pa.C.S.A.

§ 7740(a). As no purpose of a section 5602 trust remains to be achieved

upon the principal’s death, a section 5602 trust must terminate upon the

principal’s death.

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      Daughter argues that, pursuant to 20 Pa.C.S.A. § 7705, the plain

language of the trust instrument, which as outlined above does not require

automatic termination of the Trust upon Decedent’s death, controls over the

provisions of section 5603(b)(1).    Section 7705 provides that, “Except as

provided in subsection (b), the provisions of a trust instrument prevail over

any contrary provisions of this chapter.”     20 Pa.C.S.A. § 7705(a).      This

argument is without merit.

      Section 7705 confers supremacy upon the express language of a trust

instrument over the default provisions of Chapter 77 of the Probate, Estates,

and Fiduciaries Code. In this case, however, the Trust was created pursuant

to section 5602, which is contained within the Powers of Attorney Chapter of

the Probate, Estates, and Fiduciaries Code, Chapter 56.            Chapter 56

addresses the situation in which a power-of-attorney creates a trust for a

principal who is, in many cases, incapacitated.        Chapter 56 limits the

authority of a power-of-attorney to set up a trust for the principal’s benefit.

Section 5603 only authorizes a power-of-attorney to create a trust which

automatically terminates upon the principal’s death.     Furthermore, section

5603(b)(1) requires that all income and corpus of such a trust be used for

the principal’s benefit or transferred to the principal’s estate upon his or her

death.   Thus, although the express terms of a trust instrument generally

displace the default rules included in Chapter 77, that is true only if the

individual who created the trust possessed authority to include that contrary

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provision in the trust instrument.       Cf. 1 Pa.C.S.A. § 1933 (“Whenever a

general provision in a statute shall be in conflict with a special provision in

the same or another statute, the two shall be construed, if possible, so that

effect may be given to both.”). In this case, pursuant to section 5603(b)(1),

Daughter (who as Decedent’s attorney-in-fact created the Trust for

Decedent’s benefit7) lacked the authority to include a provision in the Trust

instrument    which   permitted   the    Trust   to   survive   Decedent’s   death.

Accordingly, the specific language of the Trust instrument does not control

whether the Trust terminated upon Decedent’s death.

      For all of these reasons, we conclude that pursuant to section

5603(b)(1), a section 5602 trust terminates automatically upon the

principal’s death. The attorney-in-fact who executes a trust instrument on

behalf of a principal pursuant to section 5602 lacks the authority to include a

provision in the trust instrument which permits the trust to outlive the

principal.   Thus, in this case, paragraph VI of the trust instrument is void

inasmuch as it provides that the Trust continued beyond Decedent’s death.

Instead, the Trust terminated immediately upon Decedent’s death.

7
  The record does not reflect how Daughter became Decedent’s attorney-in-
fact. As noted above, the record reflects that Decedent executed a power-
of-attorney as to Edward and David. As no party has raised this issue, we
assume for the purposes of this memorandum that Daughter lawfully
became Decedent’s attorney-in-fact at some point prior to execution of the
Trust instrument.

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      Our foregoing analysis addresses the limited question presented by

Daughter. This limited question is separate and distinct from whether

Lemon’s and/or Daughter’s authority as trustee terminated upon Decedent’s

death. Although we conclude that section 7705 cannot be used to extend

the life of a section 5602 trust, many (if not all) of the remaining provisions

of the Uniform Trust Act govern the trustee’s administration of a section

5602 trust. We decline to address whether Lemons had authority under the

Uniform Trust Act to confess judgment on the demand note and whether

Daughter has authority to execute on that confessed judgment. Daughter

has not raised this question on appeal. See Daughter’s Brief at 4. Although

David includes a version of that question in his counterstatement of the

question involved, neither Edward nor David filed a cross-appeal in this case.

Moreover, resolution of those issues is not necessary to resolution of the

discrete claim brought in Daughter’s appeal.          The trial court stayed

execution proceedings pending our disposition of Daughter’s challenge to the

termination of the Trust upon Decedent’s death.       Upon remand, the trial

court shall decide, in the first instance, whether Lemons’ confession was

appropriate and, if so, whether Daughter may execute on the confessed

judgment under the Uniform Trust Act.

      Order affirmed. Case remanded. Jurisdiction relinquished.

      Judge Musmanno joins this memorandum.

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         Judge Stabile files a Concurring Memorandum in which Judge Olson

joins.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 11/15/2016

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