In Re: Est. of: Luciani, J., Sr. ( 2016 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: ESTATE OF JOHN J. LUCIANI, IN THE SUPERIOR COURT OF
SR., DECEASED PENNSYLVANIA
APPEAL OF: CHRISTOPHER LUCIANI
No. 293 MDA 2016
Appeal from the Order Entered January 21, 2016
In the Court of Common Pleas of Lackawanna County
Orphans' Court at No(s): 35-02-683
BEFORE: GANTMAN, P.J., PANELLA, J., and JENKINS, J.
MEMORANDUM BY PANELLA, J. FILED NOVEMBER 21, 2016
Appellant, Christopher Luciani, appeals from the order denying his
objections to and approving the first and final account of his father, John J.
Luciani, Sr.’s (“Father”), federal estate tax credit shelter trust. Christopher
argues that the orphans’ court erred in concluding that the distribution of the
entirety of the trust principal to his mother, Ann Luciani (“Mother”), during
her lifetime violated the terms of the trust. After careful review, we conclude
that the orphans’ court’s findings and conclusions are well supported by the
record, and therefore affirm.
For the purposes of this appeal, the following facts are undisputed. In
1993, Father and Mother executed coincident, reciprocal wills and revocable
trusts. The wills, in relevant part, bequeathed the majority of the value of
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their property to their respective revocable trusts. The trusts, in turn,
provided for the immediate disbursement to a surviving spouse of “the
smallest amount of principal needed to reduce the Federal Estate Tax falling
due because of the death of Settlor to the lowest possible figure.” At the
time, the federal estate tax provided for an exemption for the first $600,000
of value passed through an estate to a non-spouse. The remaining assets
would stay in a “Residuary Trust.”
The Residuary Trust provided that the net income of the trust could be
disbursed, at the sole discretion of the trustees, to the surviving spouse or
to any of the couple’s four children. Of primary importance to this case, the
Residuary Trust also provided for the disbursement of the principal of the
trust, under the trustees’ sole discretion, for the “health, education, support
or maintenance” of the surviving spouse or any of the couple’s four children.
Furthermore, two of the couple’s children, Jill Mooty and Christopher,
were appointed trustees of the Residuary Trust. Both children were involved
in running the family business of Concrete Step Units (“CSU”). Mooty, an
accountant, assisted with bookkeeping and tax preparation, while
Christopher was heavily involved in the day-to-day operations of the
business.
In 2001, the federal government enacted sweeping tax reform,
including a proposed phase-out of the federal estate tax. Pursuant to the
reform, the estate tax exemption was raised to $1,000,000 in 2002, and
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escalating yearly thereafter until the estate tax would be eliminated in 2010.
Ultimately, the federal estate tax was reinstated with a significantly higher
exemption that would have covered the entirety of Father’s estate.
Father passed away in 2002, and Mother survived him. According to
estate administration documents, the estate bequeathed $1,156,084 to
Father’s revocable credit shelter trust.1 The trust retained $942,000 worth of
stock in two companies, CSU and Wayne Crushed Stone (“WCS”), in the
Residuary Trust. The trust transferred a brokerage account valued at
$164,084 and $25,000 each of CSU and WCS stock to Mother. These
distributions were memorialized in a family settlement agreement that
Christopher signed.
Pursuant to distributions in 2003 and 2006, the Residuary Trust’s
trustees transferred the entirety of the trust’s principal to Mother. While
Christopher testified that he did not remember signing to authorize these
transfers, he did not testify that the signatures were forgeries.
Both parties to this appeal agree that in 2006, Mother amended her
revocable trust agreement in a manner that modified the distribution
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1
The family settlement agreement indicates that only $942,000 was
bequeathed to the trust, with $214,084 being bequeathed directly to Mother.
A family settlement agreement can be an informal arrangement amongst the
heirs, and can be inferred from circumstances. See Walworth v. Abel, 52
Pa. 370, 373 (1866). Thus, the fact that the written agreement does not
reflect the precise accounting of the estate, but rather the ultimate
distributions, does not affect the relevant circumstances of this appeal.
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scheme to the four children. However, this document is not in the certified or
reproduced record. The parties agree that the disposition of assets contained
in this amendment was different from that contained in the Residuary Trust.
See Appellant’s Brief, at 16; Appellee’s Brief, at 10. The only evidence
regarding the content of Mother’s 2006 amended trust agreement came
from the scrivener, Attorney Nicholas Tellie:
In 2006 mom comes back to the office and amends her trust and
what she amended was the allocation portion. So she said in her
trust, in the 2006 amendment, that upon my death the real
estate of Concrete Steps would be transferred by direct or
subject to reorganization, tax free exchanges and so forth, to
Wayne Crushed Stone. Then you left the operating company of
Concrete Steps and that would still be distributed to Christopher
and Nancy, the daughter. The remaining assets instead of just
being shared with Jill and John Jr. would be shared with all four.
That’s how she reallocated it. Why, again, it was numbers,
valuations that Jill was reviewing so she signed that I think in
June or something like that. That wouldn’t work because you had
half of the shares in her husband John’s trust that said the real
estate wasn’t going to be transferred – just Christopher and
Nancy would receive Concrete Steps with the real estate, and
the two children remaining, Jill and John Jr., would receive the
remaining assets. Her amendment, which earned half the stock,
was going to go differently. Her amendment she wanted to
allocate it with Concrete Steps removing the real estate to
Wayne Crushed Stone. Still Christopher and Nancy receiving the
stock and the four children sharing. Well, that wouldn’t work.
You got two trustees over here, and four trustees over here with
different – so the only logical and reasonable thing to do was to
transfer the assets from the estate of the father to the mother,
which would effectuate her reallocation, which was just – all four
children were involved it was just a different reallocation. How
the numbers worked out. I’m assuming Jill did it with values
equal or similar. That was the background in the 2006
distribution.
N.T., 10/27/15, at 75-76.
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Mother passed away in April 2012. Shortly thereafter, Christopher’s
brother, John Luciani, Jr., filed a petition requesting that Nancy Nealon, as
de facto trustee, and Christopher and Mooty, as named trustees, file a first
and final account of the Residuary Trust. On October 24, 2012, Mooty filed a
first and final account of the Residuary Trust, indicating that the principal of
the trust had been transferred to Mother as set forth above.
Both Christopher and John, Jr. objected to the account, asserting that
the transfers to Mother were not authorized under the terms of the
Residuary Trust. Mooty passed away in February 2013, and her estate was
substituted for her as a party. Prior to her death, Mooty was deposed.
In 2015, the orphans’ court held a hearing on Christopher’s and John,
Jr.’s objections to the account. At the close of the objectors’ case-in-chief,
the orphans’ court dismissed Nealon from the case, as no evidence had been
presented that she had acted as a trustee. Mooty’s estate presented the
deposition testimony of Mooty and the testimony of Attorney Tellie as both a
factual and expert witness. On January 19, 2016, the orphans’ court denied
Christopher’s and John, Jr.’s objections. Christopher then filed this timely
appeal. John, Jr. did not file an appeal and is no longer a party to this action.
On appeal, Christopher raises three issues for our review. Issues one
and three are essentially identical, in that Christopher argues that the
distributions from the Residuary Trust were not appropriate under the terms
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of the Residuary Trust. Our standard in reviewing decisions of the orphans’
court is as follows:
The findings of a judge of the orphans’ court division, sitting
without a jury, must be accorded the same weight and effect as
the verdict of a jury, and will not be reversed by an appellate
court in the absence of an abuse of discretion or a lack of
evidentiary support. This rule is particularly applicable to findings
of fact which are predicated upon the credibility of the witnesses,
whom the judge has had the opportunity to hear and observe,
and upon the weight given to their testimony. In reviewing the
orphans’ court’s findings, 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.
When the trial court has come to a conclusion through the
exercise of its discretion, the party complaining on appeal has a
heavy burden. It is not sufficient to persuade the appellate court
that it might have reached a different conclusion if, in the first
place, charged with the duty imposed on the court below; it is
necessary to go further and show an abuse of the discretionary
power. An abuse of discretion is not merely an error of
judgment, but if in reaching a conclusion the law is overridden or
misapplied, or the judgment exercised is manifestly
unreasonable, or the result of partiality, prejudice, bias or ill-will,
as shown by the evidence [of] record, discretion is abused. A
conclusion or judgment constitutes an abuse of discretion if it is
so lacking in support as to be clearly erroneous.
We are not constrained to give the same level of deference to
the orphans’ court’s resulting legal conclusions as we are to its
credibility determinations. We will reverse any decree based on
palpably wrong or clearly inapplicable rules of law. Moreover,
we are not bound by the chancellor's findings of fact if there has
been an abuse of discretion, a capricious disregard of evidence,
or a lack of evidentiary support on the record. If the lack of
evidentiary support is apparent, reviewing tribunals have the
power to draw their own inferences and make their own
deductions from facts and conclusions of law. Nevertheless, we
will not lightly find reversible error and will reverse an orphans’
court decree only if the orphans’ court applied an incorrect rule
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of law or reached its decision on the basis of factual conclusions
unsupported by the record.
In re Paxson Trust I, 893 A.2d 99, 112-113 (Pa. Super. 2006) (citations
and quotation marks omitted; brackets in original).
Christopher’s challenge to the account of the Residuary Trust requires
us to construe its terms. “The touchstone in construing a trust is the settlor’s
intent; the language of the trust deed itself is the best and controlling
evidence of such intent.” In re Estate of Devine, 910 A.2d 699, 703 (Pa.
Super. 2006) (citation omitted).
The Residuary Trust explicitly set forth Father’s intent: “The intent is
to treat the children of settlor equally after taking into consideration all of
the values. … The intent is that each child shall receive equal values.”
Revocable Trust Agreement, 3/9/93, at 5-6. Furthermore, the Residuary
Trust provided that the trustees, within their discretion, could transfer the
principal of the Residuary Trust to Mother or any of the children for purposes
of “health, education, support or maintenance.” Id., at 4. Thus, the
Residuary Trust gave the trustees significant discretion in how to distribute
the principal of the trust, so long as the distribution was done in a manner
that ultimately treated Christopher, John, Jr., Nealon, and Mooty equally.
Based upon the certified record before us, we cannot say that the
children were ultimately treated disparately. In fact, we cannot even
ascertain how the principal of the Residuary Trust was ultimately distributed.
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Mother’s trust agreement is not in the record. Nor is any accounting of her
estate or trust.
While it is possible that the distribution to Mother of the entirety of the
principal of the Residuary Trust, for the undisputed purpose of estate
planning, was not entirely authorized by the trust, that conclusion cannot be
reached without a finding that Mother’s estate plan was not in accordance
with the stated intent of the Residuary Trust. Furthermore, there is no
allegation, and no proof, that Mother dissipated these assets in a manner
that defeated the Residuary Trust’s purposes.
The Residuary Trust at issue here was an estate-planning tool, with a
primary goal of reducing of the impact of the federal estate tax. By 2002,
that concern had been largely mooted by changes in the law. Beyond that,
the trust explicitly and clearly stated its intent to treat the children equally
after the death of Mother. The certified record contains no evidence that
Mother’s inter vivos gifts, estate, and trust distributions did not treat the
children equally.2 Therefore, Christopher did not establish his right to relief,
and is due no relief on this issue on appeal.
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2
There is some evidence in the record that Mother’s changes were
motivated by the discovery of valuable mineral rights in land transferred to
Christopher and John, Jr., thereby causing an imbalance in the values of the
shares to be distributed to the children by the Residuary Trust. See N.T.,
Deposition of Jill Mooty, 1/16/13, at 33. However, it is unclear who
transferred this property to the brothers, or whether this transfer was an
inter vivos gift or a distribution from an estate or trust. Furthermore, it is not
(Footnote Continued Next Page)
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In his remaining issue, Christopher contends that the orphans’ court
erred in permitting Attorney Tellie to testify to Father’s intent in construing
the Residuary Trust. We conclude that this issue is moot, as we have already
determined, referring to only the trust agreement itself, that Christopher is
not entitled to relief on appeal.
Order affirmed. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/21/2016
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(Footnote Continued)
even clear that this was a factor that motivated Mother’s changes. Under
these circumstances, we cannot conclude that this passing reference is
capable of supporting any finding relevant to this matter.
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