In re Vincent J. Fumo Irrevocable Children's Trust ex rel. Fumo

104 A.3d 535

2014 PA Super 235

The VINCENT J. FUMO IRREVOCABLE CHILDREN'S TRUST for the Benefit of Allison FUMO.

Appeal of Vincent J. Fumo.

No. 2459 EDA 2013

Superior Court of Pennsylvania.

Argued May 21, 2014.

Filed Oct. 17, 2014.

Reargument Denied Dec. 17, 2014.

Dionysios G. Rassias, Philadelphia, for Vincent J. Fumo, appellant.

Don P. Foster, Philadelphia, for appellee.

BEFORE: PANELLA, LAZARUS and JENKINS, JJ.

Opinion

OPINION BY JENKINS, J.

Vincent J. Fumo (“Father”) appeals from a decree removing Anthony Repici, M.D. as trustee of a trust Father created for his daughter, Allison Fumo (“Daughter”), and appointing Sylvia DiBona as successor trustee of Daughter's trust. After careful review, we affirm.

I.

Through a Trust Agreement created in 2006, Father created inter vivos irrevocable trusts for two of his children, Vincent E. Fumo, Jr. (“Son”) and Allison Fumo (“Daughter”), so that they and their children could live comfortably. Under the Trust Agreement, Son's and Daughter's trusts each became a 49.5% owner of the assets in the Fumo Family Limited Partnership (“FFLP”). Father named Roseanne Pauciello as the trustee of both trusts.

In 2009, Father was convicted of mail fraud and other offenses. In early 2010, shortly before going to federal prison, and faced with dwindling finances, Father obtained a $1.4 million loan from the FFLP with a repayment date of 2013. In 2011 and 2012, he modified the loan to extend the repayment date to 2040, when he will be 97 years old, and he then defaulted on the loan in its modified form.

On September 8, 2011, Pauciello announced that she was resigning as trustee. No one performed the duties of trustee between September 2011 and October 23, 2012, when, despite her prior resignation, Pauciello purported to appoint Samuel Bennett, the brother-in-law of Father's fiancé, as successor trustee.

On October 23, 2012, fearing that Bennett would not enforce repayment of the $1.4 million loan to the FFLP, Daughter filed a petition opposing Bennett's appointment as successor trustee and requesting termination of the trust. Daughter amended her petition twice in October and November of 2012. In response, Father and Bennett each appointed Anthony Repici, Father's longtime friend and personal physician, as successor trustee in place of Bennett.

On August 1, 2013, following an evidentiary hearing, the Orphans' Court entered a decree declaring Bennett's appointment of Repici null and void; declaring Father's appointment of Repici and void; denying Father's motion to keep the record open so that he could testify in court following his release from prison; and appointing Daughter's nominee, Sylvia DiBona, as successor trustee¹ . On August 29, 2013, Father filed a timely notice of appeal² . Without ordering Father to file a statement of matters complained of on appeal, the court filed a detailed opinion articulating its findings of fact and conclusions of law.

Father raises four arguments on appeal: (1) the Orphans' Court abused its discretion in nullifying Repici's appointment as successor trustee; (2) Daughter had no right to seek Repici's removal because her petitions only sought Bennett's removal as trustee; (3) the Orphans' Court improperly refused to keep the record open so that Father could testify in court following his release from prison; and (4) the court improperly overruled Father's preliminary objections to Daughter's second amended petition.

We hold that the Orphans' Court properly decreed Bennett's appointment of Repici null and void. The Trust Agreement required Pauciello to appoint a successor trustee within sixty days after she became unwilling to serve as trustee. Pauciello did not appoint Bennett as successor trustee until 13 months after she became unwilling to serve. Thus, Pauciello's appointment of Bennett was a ity, which in turn ified Bennett's appointment of Repici.

Furthermore, the Orphans' Court properly decreed Father's appointment of Repici null and void. The Trust Agreement prohibits Father from serving as successor trustee. The Orphans' Court's opinion makes clear that it regards Repici as Father's alter ego due to their close, longtime friendship. It therefore was necessary to decree Repici's appointment a ity to enforce the Trust Agreement's plain language and intent.

In addition, the Orphans' Court properly ified Father's appointment of Repici under the doctrine of unclean hands. The Orphans' Court found, and the record confirms, that Father appointed Repici as part of his plan to thwart repayment of his loan to the FFLP. Although the Orphans' Court did not use the term “unclean hands,” it obviously regarded Father as acting in this fashion. We do as well, since the evidence shows that Father appointed Repici to exalt his own interests over Daughter's.

Alternatively, the Orphans' Court properly removed Repici and appointed DiBona as successor trustee based on clear and convincing evidence of a “substantial change in circumstances.” 20 Pa.C.S. § 7766(b)(4). Daughter proved that Repici's appointment was part of Father's plan to stymie repayment of his $1.4 million loan to the FFLP, and Repici is unqualified to serve as trustee due to his close ties with Father and his lack of expertise in trust administration. Conversely, DiBona, a CPA and insurance broker as well as Daughter's godmother, is well qualified to administer the trust and can be counted on to protect Daughter's interests.

Finally, for the reasons provided below, we find no merit in the other arguments that Father raises on appeal.

II.

In an appeal from an Orphans' Court decree,

[we] 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. Where the rules of law on which the court relied are palpably wrong or clearly inapplicable, we will reverse the court's decree.

In re Estate of Brown, 30 A.3d 1200, 1206 (Pa.Super.2011) (citation omitted).

The Orphans' Court's decision to appoint or remove a trustee is subject to review for abuse of discretion. In re Croessant's Estate, 482 Pa. 188, 393 A.2d 443, 446 (1978) ; Holmes Trust, 392 Pa. 17, 139 A.2d 548, 551 (1958) ( “the court may remove a trustee if his continuing to act as trustee would be detrimental to the interests of the beneficiary. The matter is one for the exercise of a reasonable discretion by the court”); In Re Taylor's Estate, 320 Pa. 1, 181 A. 482, 483 (1935) (appointment of successor trustee would not be disturbed on appeal in absence of abuse of discretion).

Moreover, the Orphans' Court may invoke the doctrine of unclean hands when considering whether to appoint or remove a trustee. In Re Bosley, 26 A.3d 1104, 1114 (Pa.Super.2011) (citing Stauffer v. Stauffer, 465 Pa. 558, 351 A.2d 236, 245 (1976) ). The decision to apply the unclean hands doctrine against a party is subject to review for abuse of discretion. Id.

In addition, the Orphans' Court's decision to deny a continuance or to keep the record open is also subject to review for abuse of discretion. In Re B.M.D., 492 Pa. 454, 424 A.2d 1278, 1280 n. * (1980) (reviewing Orphans' Court's decision to deny continuance for abuse of discretion).

III.

The evidence credited by the Orphans' Court is as follows. Father is over seventy years old and is in poor health, having suffered multiple heart attacks, including one in the past several years³ . On June 23, 2006, Father executed the Vincent J. Fumo Irrevocable Children's Trust Agreement (“Trust Agreement”), which created two inter vivos, irrevocable trusts, one for Son and one for Daughter⁴ . Father's intent was to gift money in trust to Son and Daughter for their children “so that [they] would never have to suffer what he had suffered as a child”⁵ . Under the Trust Agreement, each trust became owner of a 49.5% limited partnership interest in the Fumo Family Limited Partnership (“FFLP”)⁶ . The FFLP's general partner, Vincent J. Fumo General Partnership, Inc. (“VJFGP”), became owner of the remaining one percent⁷ .

Father is the sole shareholder and first president of VJFGP⁸ . Father was succeeded as president by Andrew Cosanzo, who in turn was replaced by Tom Myers, Father's friend⁹ . Myers remains president today.

In 2007, the FFLP held approximately $3.2 million¹⁰ , giving Daughter's trust an interest of approximately $1.6 million.

Each child's trust was to dissolve on the child's 40th birthday. At the time of the creation of the Trust Agreement, Son was 37 years old, and Daughter was 16. When Son turned 40, his trust dissolved, and he received $533,000 in trust assets and personally took possession of his 49.5 percent interest in the FFLP¹¹ . Daughter's trust, however, did not receive a matching amount of $533,000. The FFLP's 2009–10 tax returns show only a payable to Daughter's trust in that amount¹² .

In Paragraph 14 of the Trust Agreement, Father appointed Roseanne Pauciello, a longtime friend, as trustee of Son's and Daughter's trusts. Paragraph 14 continues:

In the event ROSEANNE PAUCIELLO shall be unable or unwilling to act or to continue to act as a Trustee of any Trust hereunder, MITCHELL RUBIN, by signifying his acceptance in writing, shall become a Trustee hereunder in her place. If neither ROSEANNE PAUCIELLO nor MITCHELL RUBIN shall be able and willing to serve as Trustee of any Trust hereunder at any time, he or she shall be succeeded by such one or more individuals, or such series of one or more individuals, to serve as Trustees in consecutive order, as the last of them to serve shall designate in his or her Will or other written instrument delivered to the Settlor, if he is then living, or if he is not, to the adult beneficiary or beneficiaries of the Trust hereunder. If such Trustees fail so to

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