In Re: Trusts Under Will of Montgomery, R. ( 2020 )

J-A13004-20
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: TRUSTS UNDER WILL OF : IN THE SUPERIOR COURT OF
ROBERT L. MONTGOMERY, JR. : PENNSYLVANIA
DECEASED FOR THE BENEFIT OF :
H.BEATTY CHADWICK (TRUST NO. 6) :
AND MARITAL TRUST UNDER WILL :
OF ROBERT L. MONTGOMERY, JR., :
DECEASED, FOR THE BENEFIT OF :
ELIZABETH B. MONTGOMERY AS :
APPOINTED BY THE WILL OF : No. 3007 EDA 2019
ELIZABETH B. MONTGOMERY, :
DECEASED FOR THE BENEFIT OF H. :
BEATTY CHADWICK (TRUST NO. 7) :
:
:
APPEAL OF: H. BEATTY CHADWICK :
Appeal from the Order Entered September 30, 2019
In the Court of Common Pleas of Montgomery County Orphans’ Court
Division at No(s): No. 1977-X0448
BEFORE: BENDER, P.J.E., LAZARUS, J., and DUBOW, J.
MEMORANDUM BY BENDER, P.J.E.: Filed: August 13, 2020
H. Beatty Chadwick (Appellant) appeals pro se from the orphans’ court’s
adjudication of the 2018 accounts of two trusts created under the will of
Robert L. Montgomery, Jr., (Decedent), and the will of Elizabeth B.
Montgomery, the deceased wife of Decedent. Pursuant to the court’s
adjudication, Appellant’s objections were dismissed and the payment of
attorney’s fees to PNC Bank, N.A. (Trustee/Appellee) was approved. We
affirm.
As noted in a prior decision by this Court, responding to an earlier appeal
filed by Appellant, this matter has a “long, torturous, and infamous” history.
J-A13004-20
See In re Trusts Under the Will of Montgomery, 161 A.3d 392 (Pa. Super.
2017) (unpublished memorandum). The terms of the trusts provided that
Appellant was to be the lifetime beneficiary of the trusts and that after
Appellant’s death, the principal of each trust was to be distributed to various
charities. Specifically, with regard to the amount of the payment due
Appellant, he was to receive a percentage of the lesser of the net income of
the trust or a stated percentage of the fair market value of the principal of the
trust.
The present appeal arises from the filing of the fifth accounting of trust
#6 and the third accounting of trust #7. As part of the petitions for
adjudication of the accounts, Appellee requested the payment of attorney’s
fees in the amount of $447,635.40 to cover the costs incurred by it, which
were expended to defend itself against Appellant’s claims, both past and
present. Following the filing of these petitions, Appellant filed objections
alleging Appellee breached its fiduciary duties relating to the investment of
the trusts’ assets and asserting that its request for attorney’s fees should be
denied.
A hearing was held on February 26, 2019, at which the court heard
testimony and received evidence. On September 30, 2019, the court issued
its adjudications, dismissing Appellant’s objections and approving the
payment of the attorney’s fees. The orphans’ court also denied Appellant’s
motion for reconsideration. Thereafter, Appellant filed a timely appeal.
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We begin by setting forth our standard of review.
Our standard of review of the findings of an Orphans’ Court is
deferential.
When reviewing a decree entered by the Orphans’
Court, this Court 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.
In re Estate of Harrison, 745 A.2d 676, 678-79 (Pa. Super.
2000), appeal denied, 563 Pa. 646, 758 A.2d 1200 (2000)
(internal citations and quotation marks omitted). “The Orphans’
Court decision will not be reversed unless there has been an abuse
of discretion or a fundamental error in applying the correct
principles of law.” In re Estate of Luongo, 823 A.2d 942, 951
(Pa. Super. 2003), appeal denied, 577 Pa. 722, 847 A.2d 1287(2003).
In re Fiedler, 132 A.3d 1010, 1018 (Pa. Super. 2016) (quoting In re Estate
of Whitley, 50 A.3d 203, 206-07 (Pa. Super. 2012)).
Appellant raises the following two issues for our review:
1. Where the trustee of trusts with a beneficiary entitled only to
receive trust income invests for total return principally by
capital appreciation and the trusts achieve substantial capital
appreciation, did the court below err in dismissing objections
to [a]ccounts that the trustee violated fiduciary duties by
refusing to exercise its statutory power to adjust the total
return of the trusts to produce income which will accomplish
the purposes of the trusts as set forth in the terms thereof?
2. Whether the court below abused its discretion in allowing a
trustee to collect from trusts additional counsel fees and
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expenses of $477,635.40 for an [a]ccounting proceeding where
$516,733.78 already had been allowed for such purposes,
1,874 hours were billed by counsel to represent the trustee in
such proceeding where the evidentiary hearing was less than
one day, and total fees and expenses allowed were 88% of the
combined assets of the trusts?
Appellant’s brief at 37.
We have reviewed the certified record, the briefs of the parties, the
applicable law, and the thorough 17-page opinion of the Honorable Lois E.
Murphy of the Court of Common Pleas of Montgomery County, dated
September 30, 2019. We conclude that Judge Murphy’s opinion properly
disposes of the issues and accompanying arguments presented by Appellant.
Accordingly, we adopt her opinion as our own and affirm the order dismissing
Appellant’s objections.
Order affirmed.
Judge Dubow joins this memorandum.
Judge Lazarus files a concurring statement in which President Judge
Emeritus Bender and Judge Dubow join.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/13/20
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IN TiiE COURT OF COMMON PLEAS OF MONTGOMERY COUNTY, PENNSYLVANIA
ORPHANS' COURT DIVISION
No. 1977·X0448
• • • • •
ESTATE OF ROBERT L. MONTOOMERY, JR., DECEASED
Sur Trust for Herbert B. Chadwick (Trust No. 6)
• • • • •
The fifth account of PNC Bank, N.A.1, trustee of the testamentary trust created und<:r
Item FOURTH(AX4) (hereinafter refered to as "trust No. 6") of the will of Robert L.
Montgomery, Jr., Deceased, was called for audit on June 4, 2018. The objections filed therete by
H. Beatty Chadwick (hereinafter ''the objectant") were heard on February 26, 2019, and the
matter is now ripe for adjudication
COUNSEL APPEARED AS FOLLOWS:
DUANE MO'RRIS LLP
By: Lewis R. Olshin, Esquire
for the Accountant
COMMONWEALTH OF PENNSYLVANIA
OFFJCE OF THE ATTORNEY GENERAL
By: David Dembe, Esquire, Deputy Attorney General
as par�n: patriae, for charitable interests
I. PNC Bank, N.A. succeeded Provident National Biink \Ylllch was named as a trustee in Item 'f6NTH of Robert
Moncgon.,ery', Win.
THIS DOCUMENT WAS DOCKETED AND SENT ON 09l30/2019
1977-X0448.105.3 Adjudication, Page�
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�g H. Beatty Chadwick, objectant
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�� The account shows a balance of principal and income in the amount of $468,139.89
J! composed of stocks, bonds, cash, and cash equivalents as set forth on pages 18, 19 and 40.
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�� Principal of$462,221.59 has been revalued as of February 15, 2018 at $571,026.86.
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al.� seek Court approval of the payment of certain legal fees and costs from principal. The trust
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1t is stated that all parties in interest, including representatives of those not suijuris and
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.2? of those still unborn or otherwise undetermined, have had timely notice of the filing of the
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161 A.3d 392 (Table) (2017).
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1977-X0448.105.3 Adjudication, Page 11
stated it is what is commonly known as a NIMCRUT (net income makeup charitable remainder
uni trust) and described the origin of this type of trust as follows:
You had this problem with the regular uni trust of depleting principal. The idea of the net
income trust was to try to preserve the principal so you had that available for the
remaindermen -- in these particular cases, charities -- but you were still providing
income. And the net income makeup allowed you, basically -- in those years where you
[ eamed) over the percentage you could pay out in addition to that percentage.
(N.T. 187.) When asked ways to generate additional income. Mr. Davidson suggested the trust
language could be modified to define post-contribution capital gains as income. (N.T. 190.)
When asked about changing the allocation of assets to benefit an income beneficiary, Mr.
Davidson testified:
[W]hether you are 65/35, whether you're 60/40, 70/30-- l mean pick your range -- within
that range you' re still balanced, per se, and you' re not changing the income generation
versus the growth that much. But sometimes just a small tweak, even though you might
free up only a couple hundred dollars, sometimes that makes a difference to an income
beneficiary. So you can do those tweakings. It doesn't get you a whole lot of difference
normally on the smaller trusts ... My understanding is that we're looking at trusts that
collectively are between a million and $1. l million. And so you are looking at a little
over a half a million apiece, which doesn't give you a lot of room to play.
(N.T. 192-93). He commented that the present allocation of assets in this trust is in "a safe zone"
and added: .. 1 think you will find that most trust companies will consider that to be a good total
allocation for total return." (N.T. 194.)
During cross examination by counsel for the trustee, Mr. Davidson suggested a trustee
might change a 65/3 5 allocation to 70/30 "to ease some of the pressure that the trustee is under
because of the income beneficiary." (N.T. 197.) Mr. Davidson acknowledged that he reviewed
neither this Court's adjudications of the prior accounts filed for this trust nor the Superior
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r� Court's opinion on this objectant's unsuccessful appeal from the last adjudication. He agreed
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:;i the income beneficiary. (N.T. 199.) He agreed that the trustee could not make a unilateral
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change to the trust to allow for principal invasions for the income beneficiary. (N.T. 202.)
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firm of Duane Morris. He testified that he served as co-trustee of this trust through the
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8 .5; adjudication of the last accounts, at which point his resignation became effective. Mr. Cass
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�j tallied the surcharges that the objectant had sought in connection with the prior accounts of this
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�� and the companion trust, and which were denied by this Court and the Superior Court, at
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5- $897,408.93. He identified three Duane Morris invoices showing the fees incurred by and
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Q� services rendered to the trustee for this trust and the companion trust through the appeal period.
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7ii (Exh. A-14.) He stated that the amount being sought has been reduced to $447,635.40. He
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explained the extensive filings and proceedings that were required in the surcharge litigation.
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E:: 431 Pa. 542, 246 A.2d 337 (1968). The LaRocca factors
include: (1) the amount of work performed; (2) the character of the services
rendered; (3) the difficulty of the problems involved; (4) the importance of the litigation;
(5) the amount of money or value of the property in question; (6) the degree of
responsibility incurred; (7) whether the fund involved was created by an attorney; (8) the
professional skil I and standing of the attorney in his profession; (9) the results he was
able to obtain; (10) the ability of the client to pay a reasonable fee for the services
rendered, and (10) very importantly, the amount of money or value of the property in
question. LaRocca Estate, 431 Pa. at 547, 246 A.2d at 339. See also, Wanamaker Trust,
30 Fiduc. Rep. 240 (O.C. Montg. 1980). In Thompson Estate, 426 Pa. 270, pages 281-
282, 232 A.2d 625, page 631, supra, the Court pertinently said: 'It is a 'well-entrenched
rule of Jaw in this State that the responsibility for determining the amount of counsel fees
rests primarily with the auditing judge. An executor or a trustee is an officer of the
orphans' court and accountable to such court for all his actions of commission and
omission in the performance of his fiduciary duties; such duty to account embraces all
payments made from estate or trust funds by way of compensation to himself or his
counsel. Thompson Estate, at 276, 678.
(Slip opinion, pp. 11-12.) The evidence produced at the hearing established the extraordinary
amount of work by counsel that was needed after the prior account was filed, which included
defending the account against the objections, filing exceptions to the Court's adjudication, and
litigating the objectant's appeal before the Superior Court. The trustee's counsel accomplished
the tasks at hand at all stages, having fended off an $800,000+ surcharge request, having
obtained a successful result on the exceptions before the Court en bane, and having prevailed
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1977-X0448.105.3 Adjudication, Page 15
before the appellate court. These services were clearly necessary and were rendered by counsel
from a highly-regarded law firm. The objectant, due to his training as an attorney," had the
option of litigating without incurring any counsel fees. A corporate trustee cannot appear in
propria persona and PNC was obligated to retain counsel who could defend it competently
Accordingly, objections nos. 9 and 1 l are dismissed.
The trustee established that the additional counsel fees now being sought are not
duplicative of amounts previously considered by the Court and objection no. l O is dismissed. In
addition. counsel for the trustee took pains to establish that the additional compensation being
sought related only to legal work performed in connection with the litigation relating to the prior
accounts up through the appeal process, not to time expended to substantiate the fees.
Objections nos. 12 and 13 are also dismissed.
Regarding objection no. 14, Mr. Cass testified he received commissions for his work as a
trustee and charged for his time as an attorney when he was serving trust counsel. The objectant
offered no evidence to the contrary and this objection is dismissed.
Finally, the objectant suggests no additional fees and costs should be allowed on
equitable grounds. No grounds for disapproving any of the trustees actions having been
established, we find this objection no. 15 to be wholly without merit and it is dismissed.
7 The objectant was admitted to the practice of law in Pennsylvania in 1961, but his license has been suspended
since 2005.
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1977-X0448.105.3 Adjudication, Page 1 E
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ss'tls In the rider to question 14, Part I, of the petition for adjudication, the trustee requests
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�O 8 approval of the fees and costs discussed at length above. Having determined the amounts were
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[ 16 reasonable and necessary. we approve the payment of $232,925.61 from principal to Duane
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� � Morris. In Pait II to the rider, the trustee also asks the Court to approve a disbursement from
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� .g incurred by the trust in connection with the preparation of the account and the petition for
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5 ;g adjudication and for the presentation of the account at audit. This request is also approved.
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Upon confirmation of the fifth account, PNC Bank, N.A.1 trustee, is hereby discharged
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�a§ and released from all liability with respect to the trust herein and the beneficiaries thereunder for
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c:: la Subject to the views expressed herein and to distributions heretofore properly made, the
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AND NOW, this '2. 1.� day of September, 2019, the fifth account is confirmed .
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A motion for reconsideration of this adjudication may be filed within twenty (20) days
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�i from the entry hereof. An appeal from this adjudication may be taken to the appropriate
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l'. iii appellate court within thirty (30) days from the entry of the adjudication. See, Pa.O.C. Rule 8.2
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and Montgomery County Local Rule 8.2A, and Pa. R.A.P. 902 and 903.
BY THE COURT:
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This adjudication efiled '1';./c,/J 9
Lewis R. Olshin, Esquire
David Dembe, Sr. Deputy Attorney General
Herbert B. Chadwick, prose
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