In re Trust Under Deed of Jean M. Goodwin

258 A.3d 533 (Table)

TRUST UNDER DEED OF JEAN M. GOODWIN, SETTLOR DEED DATED FEBRUARY 10, 2000

Appeal of: Lynn S. Nagele, Executrix of the Estate of Edwin J. Goodwin, Deceased, Named Executor of Jean Goodwin's Estate, and Surviving Co-trustee

No. 313 EDA 2020

Superior Court of Pennsylvania.

Filed June 17, 2021

MEMORANDUM BY COLINS, J.:

Appellant, Lynn S. Nagele, appeals from the order entered December 11, 2019, that: (1) confirmed the accounting of the trust established under the Deed of Trust of Jean M. Goodwin, Settlor, dated February 10, 2000 ("the Trust"), subject to certain findings of the trial court; (2) ordered the filing of a schedule of distribution of funds from the Trust; and (3) awarded the distribution of payments from the Trust, following confirmation of the schedule of distribution. We affirm.

The facts and procedural history underlying these appeals are as follows. Edwin J. Goodwin, Jr. ("Husband"), and Jean M. Goodwin ("Wife") were husband and wife. They were the parents of Appellant Lynn S. Nagele ("Lynn"), Appellee Thomas Goodwin ("Thomas"), and Edwin J. Goodwin III.¹ Lynn has a son, Michael Nagele ("Michael").

Wife died on December 1, 2002, leaving a will² and the deed of trust. Both the will and the deed of trust had been drafted by Albert L. Chase, Esquire, who served as long-term counsel for Husband, Wife, and Lynn. Attorney Chase took his fees from the Trust's assets, not from the funds of Wife's estate.

The deed of trust provided for the creation of a marital trust ("Paragraph SECOND") and a non-marital trust ("Paragraph THIRD") following Wife's death. Trial Court Opinion ("Trial Ct. Op."), dated December 11, 2019, at 2. The terms of the marital trust were far less restrictive than those relating to the non-marital trust. However, in September 2005, when the assets of Wife's estate were transferred pursuant to the terms of the residuary clause of her will, there were insufficient funds³ to establish both kinds of trusts and only the non-marital trust ("the Trust") was funded. Husband and Lynn were named as trustees. The terms of the Trust required that --

the Trustees shall pay the net income to [Husband] or apply it directly to his benefit ... In addition, the Trustees may from time to time pay to him or apply directly for his benefit so much of the principal as the Trustees may, in their sole discretion, deem proper for his maintenance and support, after considering all other assets and sources of income available to him[.] ...

[H]usband shall have the right to withdraw from principal from time to time amounts totaling not more than Five Thousand Dollars ($5,000.00) or Five (5%) percent of principal from the Trust, whichever is greater, in any calendar year, by giving the Trustees notice. The right shall not be cumulative.

Exhibit 8 at 6, THIRD Paragraph, §§ A.-B.

Husband died on July 4, 2015.⁴ On September 2, 2016, Thomas, individually and as a remainder beneficiary of the Trust, filed a petition to compel the filing of an accounting and inventory of the Trust,⁵ which the trial court granted on October 4, 2016.

On February 1, 2017, Lynn filed the Trust accounting, which is dated from September 30, 2005, to January 1, 2017. According to the accounting, the Trust consists of --

principal receipts of $443,005.94, income of $115,758.59, gains on sales of principal assets of $121,204.00, since reduced by principal disbursements of $78,368.22, income disbursements of $4.00 and distributions to beneficiaries of $0.00 from principal and $115,754.59 from income, leaving a combined balance on hand of $492,116.31 held in stock, bonds, mutual funds and cash[.] ...

All parties having or claiming any interest in the estate of whom the accountant has notice are stated to have received written notice of the audits in conformity with the Rules of Court.

All said parties having any interest in this Trust are said to be living, of age, and sui juris ...

Trial Ct. Op., dated December 11, 2019, at 2-3.

On March 3, 2017, Thomas filed 26 objections to the accounting.⁶ Thomas's objections included:

8. Thomas ... hereby objects to the fees of [Attorney] Chase in the amount of $17,945.00 paid on 9/19/2007 and any other fees.

9. Thomas ... hereby objects to the fees of [Attorney] Chase in the amount of $3,000.00 paid on 4/23/2014 and any other fees. ...

12. Objection to the vesting or making of notes to family members. ...

f. [Michael's] balance due information of $8,520.37 is lacking in specificity in order to permit an accurate review of this amount, what it is for and how that number was arrived at. ...

18. The page 10 listing for Michael['s] amount due 7/19/2016 of $8,520.37. If the [a]ccount[ing] is filed through January 1, 2017, this information is outdated and should have been updated. In addition, there is no information as to why this amount was due, what the terms were, whether it is secured, and the interest rate. This is self-dealing for Lynn ...

22. [Michael's] payment on page 15 in 2010 of $7,500.00 is objected to as it is completely lacking in any information in order to permit accurately a review of this alleged transaction. This transaction involving the Trustee's son appears to be self-dealing and complete documentation is requested. The income payments to [Husband] are objected to as it is believed that they do not match up to income earned. In addition, the [a]ccount[ing] seems to make it appear that there were payment[s] each year. The Trust appears to make provisions for quarterly payments. ...

26. Objection to the schedule[ ] of distribution based on the incorrect [a]ccount[ing] and insufficient cash on hand to make full distributions.

Objections to First and Final Account[ing], 3/3/2017, at 2-3, 5-6.

On March 6, 2017, the trial court called for an audit of the Trust.⁷ Discovery occurred, and Lynn provided brokerage statements, bank statements, and fiduciary income tax returns dating back to 2002.

On August 20 and 21, 2018, the trial court held a hearing on these objections. Prior to the hearing, Thomas withdrew Objections Number 5 to 7, 12(a)-(c) & (g), 16, 17, and 19. N.T., 8/20/2018, at 5.

At the hearing, Lynn testified that she would discuss the Trust's money with Husband and would tell him, "[I]t's your money, [D]ad[.]" Id. at 16. When asked if her impression was that Husband could receive whatever he wanted from the Trust, she answered affirmatively. Id. at 27. When asked if Husband could spend all the Trust's money, she replied, "Sure. It was his money." Id. at 29; see also id. at 45 ("it was his anyhow"). She also confirmed that she knew that Husband was making principal distributions from the Trust. Id. at 29. After reviewing a series of distributions made by Husband from 2003 to 2006, Lynn agreed "that approximately $56,000 that went out was principal" and that she "didn't do anything to stop that[.]" Id. at 32. When asked if she knew that the Trust's principal was supposed to be "only going out at discretion[,]" she answered affirmatively. Id. at 45. She also acknowledged that, despite being co-trustee, she was not involved in any distributions made while Husband was alive; instead, Husband "was the one in charge of all the distributions being made[.]" Id. at 50.

Lynn was asked about a loan from the Trust to herself and Robert Nagele that was listed in the accounting as "forgiven"; she admitted that the loan was not forgiven and that the notation in the accounting was a mistake. Id. at 43; see also id. at 121.

Attorney Chase also testified. He discussed an alleged payment by Michael for a mortgage loan made from the Trust:

[Q. I]f there is everything relating to this alleged $7,500 payment, it should be in the documents which were produced [to] me by the discovery process, correct?

A. That may be all I had. ...

Q. I am saying you gave me everything you had, but there was nothing in there about that $7,500?

A....[I]f you say it is. ...

Q. You saw no documents to establish that, correct?

A. My information was that it was paid to [Husband]. That's one of the reasons I couldn't get the accounts to balance.

Q. Sir, my question was not whether you heard, somebody told you, you thought. My question was, you didn't see any documents to support that claim, did you?

A. Not at the time that I answered, no.

Q. What about now?

A. I have seen some since then.

Q. And they have never been produced, have they?

A. I don't know.

Q. Well, if you didn't produce them –

A. I have seen them since we started in this proceeding.

Q. But they have never been produced as part of the discovery process ...

A. Some of the things just came through with [Lynn].

Q. And that's a little late, isn't it?

A. It's during the process.

N.T., 8/21/2019, at 14-15.

Additionally, Attorney Chase confirmed that the Trust was not a "marital deduction trust[,] " because "[t]he assets were not sufficient to create one." Id. at 17. He repeatedly testified that he believed that Husband could do whatever he wanted with the Trust's monies, because "[i]t was all his." Id. at 39. For example,

Q. In your deposition on line 6, page 21, I ask, my question is: Where is the authority in the [w]ill to allow distributions?

And your response was: He could take it out of the [T]rust, and whether it was in the [T]rust at that time or not, I assume that he decided to take it this way. ...

A. Yes, I think that's basically what I said. ... [Husband] handled this stuff himself and he did what he did.

Id. at 40. The following portion of Attorney Chase's deposition was also read into the record: "I was permitted to counsel [Husband] on anything he wanted to ask me. But I didn't ask him that I'm going to counsel him on things he wasn't asking me." Id. at 41.

On December 11, 2019, by order and opinion, the trial court confirmed the accounting and ordered Lynn to pay distributions from the Trust. In the order, Attorney Chase's legal fees were "capped at $10,000.00 in light of the errors in counseling the trustees[,]" thereby requiring Attorney Chase to "refund the trust $11,005.00." Trial Ct....