In re Amended & Restated Deed of Tr. of Margaret M. Holdship Dated Feb. 26, 1981

IN RE: AMENDED AND RESTATED DEED OF TRUST OF MARGARET M. HOLDSHIP DATED FEBRUARY 26, 1981 FBO CAROLINE F. HOLDSHIP APPEAL OF: FREDERICK H. JONES AND PETER D. JONES

No. 166 WDA 2022

No. J-A22038-22

Superior Court of Pennsylvania

December 23, 2022

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

Appeal from the Order Entered January 13, 2022 In the Court of Common Pleas of Allegheny County Orphans' Court at No(s) 8482 of 1993

BEFORE: OLSON, J., DUBOW, J., and COLINS, J.^[*]

MEMORANDUM

COLINS, J.

Frederick H. Jones ("Frederick") and Peter D. Jones ("Peter," collectively "Beneficiaries") appeal from the order sustaining the preliminary objections of PNC Bank, National Association ("PNC") to Appellants' petition seeking to remove PNC as co-trustee of the Trust of Margaret M. Holdship F/B/O Caroline F Holdship ("Trust") and requesting that the orphans' court compel distributions from the Trust. After careful review, we affirm.

The Trust was created pursuant to an agreement dated May 10, 1965, which was amended and restated in its entirety in the Restating Amendment of Revocable Trust Agreement, dated February 26, 1981 ("Agreement"). The Agreement appointed PNC's predecessor, Pittsburgh National Bank, as the co-trustee of the Trust. The Agreement provided that after the death of the settlor, Margaret M. Holdship ("Margaret"), her sister, Caroline F. Holdship ("Caroline"), would serve as co-trustee and would receive all net income of the Trust. Agreement, Art. II.A, IX.

Caroline died on June 24, 2013. Under the Trust, Frederick succeeded Caroline as the co-trustee with PNC. Id., Art. IX. Frederick's powers as co-trustee are limited by the Agreement, such that "any discretionary power to disburse principal or income to or for the benefit of the individual trustee shall be vested solely in the corporate trustee," PNC. Id. The Agreement does not provide for the appointment of any other co-trustee should Frederick be unable to fulfill his role.

Upon the death of Caroline, Frederick and Peter, as the living children of Margaret's other sister, Katharine Holdship Jones ("Katharine"), became the current beneficiaries of the Trust. The Agreement provides that

the trustee shall pay so much net income and principal to or for the benefit of the children of [Katharine] who are then living, in such proportions and at such times as the trustee, in its discretion, shall deem advisable for their health, maintenance, support and education.

Id., Art. II.B. Katharine had one other child, Benjamin Franklin Jones, IV ("Benjamin"), who predeceased Caroline.

The Agreement further provides that

Upon the death of the survivor of the children of [Katharine] during the continuance of this trust for their benefit, . . . any remaining principal shall be distributed to the living issue of [Katharine], per stirpes, or in default of issue, to [Margaret's] heirs in accordance with the intestate laws of Pennsylvania.

Id., Art. II.C. There are currently ten contingent remainder beneficiaries: Peter's six children, Frederick's two grandchildren, and Benjamin's two surviving children (collectively, "Remainder Beneficiaries"). See Amended Petition ¶12. Thus, upon the death of the survivor of Frederick or Peter, the Trust will terminate, and the remainder of the principal will be distributed to the Remainder Beneficiaries.

On August 9, 2021, Beneficiaries filed a petition for rule to show cause, requesting that the orphans' court compel immediate distributions to Beneficiaries and seeking the removal of PNC as co-trustee. PNC filed preliminary objections to the petition; however, before the orphans' court ruled on the objections, Beneficiaries filed an amended petition on October 1, 2021, seeking the same relief as in their initial petition.

In the amended petition, Beneficiaries allege that PNC has had a "revolving door policy of staffing the Trust" and has engaged in "inconsistent and ad hoc policy changes with respect to administering the Trust" since they became beneficiaries in 2013. Amended Petition ¶69. Specifically, Beneficiaries allege that PNC initially treated the Trust as a unitrust^[1] and began distributing 4% of the value of the Trust corpus quarterly, but then reduced the payments to 3.5% in 2018. Id. ¶¶15-17. Finally, in 2020, PNC informed Beneficiaries that they were not entitled to quarterly distributions and instead that they would have to request specific distributions and provide supporting documentation, including receipts and copies of their tax returns to ascertain Beneficiaries' outside resources. Id. ¶¶18-20, 23, 28, 32. PNC also informed Beneficiaries that they would only consider expenses related to one residence and would not consider costs to own or lease luxury automobiles. Id. ¶31.

In addition, Beneficiaries note that there have been eight changes of account and investment managers assigned to the Trust since 2014, which they contend has led to them being "unable to build a relationship of trust and confidence" with any of the individuals at PNC. Id. ¶¶35-36. Beneficiaries also decry PNC's decision to retain the K&L Gates law firm without consultation of the co-trustee, Frederick; Beneficiaries aver that K&L Gates later communicated with them in a "condescending and inappropriate" manner and billed the Trust in excess of $32,000 of legal fees during 2020 and 2021. Id. ¶¶23, 26-27, 44. Beneficiaries also assert that PNC refused to cooperate with Frederick on his request that Peter be added as a co-trustee or a successor co-trustee after Frederick's death. Id. ¶39.

In Count I of the Amended Petition, Beneficiaries seek a "return to the status quo before PNC's unilateral policy changes" and request that the orphans' court direct PNC to begin making regular distributions to Beneficiaries consistent with PNC's policy prior to 2020. Id. ¶¶56-64.

In Count II, Beneficiaries request the removal of PNC as a trustee pursuant to the Pennsylvania Uniform Trust Act ("UTA"), based upon PNC's alleged serious breach of the trust, failure to cooperate with its co-trustee, Frederick, its ineffective administration of the Trust, and changes in circumstances. Id. ¶67; see also 20 Pa.C.S. § 7766. Beneficiaries seek the appointment of BNY Mellon, N.A. ("BNY") as the new corporate co-trustee, noting that BNY is the trustee of Beneficiaries' other trust accounts, Beneficiaries have a long-standing relationship with BNY through their account managers and based upon their fathers' service on the Board of Directors of BNY, and BNY charges lower administration fees. Amended Petition ¶¶48-52, 71-73.

PNC filed preliminary objections to the amended petition on October 22, 2021, requesting the dismissal of the amended petition for (i) failure to join necessary parties (the Remainder Beneficiaries); (ii) failure to file consents of the Remainder Beneficiaries to the requested relief; (iii) failure to conform to law or rule regarding the initiation of the proceeding; and (iv) in the nature of a demurrer as to both counts of the amended petition. Subsequent to the filing of the preliminary objections but prior to the orphans' court's ruling on the objections, Beneficiaries filed consents from eight of the ten Remainder Beneficiaries to the relief sought in the amended petition.

Following oral argument, the orphans' court issued a memorandum opinion and order on January 12, 2022 sustaining the objections and dismissing the amended petition. The court concluded that the Remainder Beneficiaries are necessary and indispensable parties who were required to be joined in the litigation and to be served with filings pursuant to the rules of court. Orphans' Court Opinion, 1/12/22, at 4-5. In addition, the court determined that Beneficiaries had not alleged that PNC was acting outside its discretion in requesting documentary support from Beneficiaries in order to ensure that any distributions were proper under the standard set forth in the Trust and further that the orphans' court lacked authority to amend the Trust to compel mandatory distributions. Id. The court concluded by stating that:

The bottom line is that [PNC] is acting within its discretionary authority, and its fiduciary responsibility to the Remainder Beneficiaries, in requiring [Beneficiaries] to produce certain information/documentation. If [Beneficiaries] choose not to provide such information/documentation, they run the risk of not receiving any distributions. In the event that [Beneficiaries] have a claim that the specifics of the requested information/documentation is overreaching, burdensome, etc., they are entitled to file a new Petition, including all necessary parties and proper service.

Id. at 5.

On January 28, 2022, Beneficiaries filed a motion for reconsideration, which the orphans' court denied on February 2, 2022. Beneficiaries then filed a timely notice of appeal.^[2]

Beneficiaries present the following issues for our review:

1. Whether the Orphans' Court abused its discretion in sustaining the Preliminary Objections to Beneficiaries' request to remove the Co-Trustee without considering the grounds for removal raised in the Amended Petition that contained averments meeting each of four grounds for removal under the Pennsylvania Uniform Trust Act?

2.Whether the Orphans' Court abused its discretion by sustaining the Preliminary Objections to the Petition's demand for distribution by disregarding the proper standard of review of preliminary objections and refusing to allow discovery or an evidentiary hearing to interpret the meaning of the Trust's limited discretionary distribution standard in light of the matters pled in the Amended Petition?

3. Whether the Orphans' Court erred when it concluded that the Trust's future contingent remainder beneficiaries

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