In re PNC Bank, N.A.
| Decision Date | 12 October 2021 |
| Docket Number | 1591 EDA 2020 |
| Parties | TRUST UNDER DEED OF WALLACE F. OTT Appeal of: PNC Bank, N.A. |
| Court | Pennsylvania Superior Court |
Vincent V. Carissimi, Philadelphia, for appellant.
Karl L. Prior, King of Prussia, for appellee.
Howard G. Hopkirk, Office of the Attorney General, Harrisburg, for Patriae, participating party.
PNC Bank, N.A. ("Accountant" or "PNC"), appeals from the Order overruling in part and sustaining in part the objections filed by co-trustees/beneficiaries Robert W. Prigge, Jr., and James E. Shryock ("Objectors") to the Third Account of the Wallace Ott Inter Vivos Trust ("Trust"). PNC challenges the orphans’ court's limiting of PNC's trust administration fee to five percent of income and its granting a one-time principal fee of $145,000 as compensation for services rendered during the third accounting period covering November 8, 2004, to May 15, 2017. PNC also challenges the orphans’ court's denial of its request for the Trust to pay its attorney's fees. After careful review, we affirm.
We glean the following relevant facts from the orphans’ court's July 20, 2020 Adjudication and the reproduced record. On June 10, 1954, Wallace Ott ("Settlor") executed a Deed of Trust for the benefit of his four grandchildren and their issue, appointing Tradesmens Land Title Bank and Trust Company ("Tradesmens") as trust administrator. Settlor appointed Tradesmens and himself as co-trustees. The Trust instrument does not contain any provisions addressing trustee compensation. However, also on June 10, 1954, Tradesmens’ assistant vice president, who had signed the Trust instrument on behalf of Tradesmens, sent a letter addressed to Settlor ("the 1954 Letter") containing the following paragraph regarding its fee for administering the Trust:
This letter is to advise you that our fee for administering the trust which you established yesterday for the benefit of your grandchildren will be the same as that which we are currently charging in Mrs. Ott's Deed of Trust and in your personal Deed of Trust; namely [5%] of income collected.
Letter from Sidney B. Dexter to Settlor, dated June 10, 1954.
Settlor died on July 18, 1962. To discharge Settlor's estate, Provident Tradesmens Bank and Trust Company ("Provident"), Trademens’ successor in interest, filed a First Account covering the period of July 10, 1954, to April 4, 1963. No one objected, and the court confirmed the First Account on December 27, 1963. Throughout the first accounting period, the Trust had paid Provident an administrative fee of five percent of the Trust's income ("five percent income commission") pursuant to the 1954 Letter. The court also confirmed the appointment of Richard W. Shryock and John S. Prigge, Jr., as co-trustees, as provided in the Trust instrument, along with Provident.
Richard Shryock died in May 2003, and on May 25, 2005, PNC, Provident's successor in interest, filed a Second Account covering the period from September 10, 1971, to November 8, 2004. PNC requested an interim principal commission of 2.8% for this second accounting period when the fair market value of the Trust was approximately $1.9 million. No one objected, and the court confirmed the Second Account, granted the requested principal commission, and confirmed the appointment of Objector Jamie Shryock to succeed Richard Shryock as co-trustee. Again, the Trust paid PNC a five percent income fee pursuant to the 1954 Letter throughout the second accounting period.
John Prigge, Jr. died on May 15, 2017, and a majority of the income beneficiaries appointed Objector Robert Prigge, Jr., to replace him as co-trustee. Intending to discharge John Prigge's estate, PNC prepared a Third Account covering the period from November 8, 2004, to May 15, 2017. By email dated August 21, 2018, PNC informed Objector Jamie Shryock that the Third Account was nearly finished and that it intended to seek a one-time principal fee of $145,000 as a "gesture of good faith," a figure PNC believed was "reasonable under the circumstances." Email from PNC's Mikal Payne, dated 8/21/18, RR at 810a-811a. See also N.T., 11/5/19, at 77-78 (). In an email dated August 29, 2018, Mr. Payne informed Jamie Shryock that "[t]he trust is currently being charged 5% of collected income; whereas, other irrevocable trusts we administer are charged according to our published fee schedule beginning at 1.4% on the first $2,000,000 and 1% on the next $3,000,000." Email from Payne, dated 8/29/18, RR 814a. During the third accounting period, PNC once again collected a five percent income commission pursuant to the 1954 Letter, totaling approximately $48,000.00.1
On October 10, 2018, PNC informed all of the beneficiaries about its intent to collect an "interim principal fee" by sending a letter informing them that it would be requesting such approval from the court. RR. 816a-817a. In that letter, PNC requested that the beneficiaries "consent" to a "a one-time principal fee of $142,751.63," which it explained was one-half of what PNC would have earned if they had charged fees beginning in 2007 in accordance with its tiered fee schedule. Id . The letter concluded that PNC would seek the court's approval for the full amount in accordance with their published fee schedule, i.e. , $285,503.25, if the beneficiaries did not "consent" to its suggested interim principal fee. Id .
On April 2, 2019, PNC filed its Petition for Adjudication, seeking approval of the Trust's Third Account, and requesting fees of $69,464.36 as income commission and $216,038.89 as principal commission, an aggregate of $285,503.25.2 See Rider annexed to Third Account, at ¶(4)(2).3 PNC also sought attorney's fees of $13,270.93 representing those incurred through March 31, 2019, and a reserve of $7,500 for counsel fees and expenses incurred in connection with the preparation and filing of the Third Account.
On May 3, 2019, Objectors filed Objections to the Third Account, later amended with permission, asserting that (1) the additional compensation sought by PNC was excessive and unreasonable; (2) Section 7768 of the Uniform Trust Act, 20 Pa.C.S. § 7768, if applicable, did not require rote application of a trustee's published standard fee schedule; and (3) the requested attorney's fees are improper as PNC should use corporate funds, not Trust funds, to pay for its defense of its Third Account.4 PNC responded that pursuant to Section 7768(a) of the Uniform Trust Act, its request for interim compensation and attorney's fees was reasonable.
The court began a non-jury trial on November 5, 2019, at which Objectors first presented testimony as on cross from the PNC fiduciary advisor in charge of the Trust, Mikal L. Payne, CFP. Mr. Payne testified, inter alia , that the management of the Trust required no special attention. N.T., 11/5/19, at 25. In addition, the court admitted an emailed letter from Mr. Payne to Objector Jamie Shryock, indicating it would seek court approval for a "one-time principal fee of $145,000 ... as compensation for fiduciary services rendered during the accounting period." See Email message from Mikal L. Payne to Jamie Shryock, dated 8/21/18, at 2, RR at 810a-811a. Objectors also presented evidence that PNC and its predecessors in interest had only ever charged the Trust a five percent income commission. Objector Shryock testified that PNC never approached him during the third accounting period to discuss either its fee schedule or additional compensation. He stated he was, thus, "dumbfounded" by PNC's request for increased income commission. Adjudication at 7, citing N.T. at 95.
The trial continued on February 11, 2020, after the Objectors had filed amended objections. PNC presented direct testimony from Mr. Payne, who "reaffirmed his belief in the reasonableness of the $145,000 principal commission." Adjudication at 9, citing N.T., 2/11/2020, at 7-8. Mr. Payne stated that the "offer" of $145,000 as an interim principal commission was reasonable because it would "avoid the time and hassle of litigating these things, and [ ] get to that result more expeditiously[.]" Id . at 10, citing N.T., 2/11/20, at 25. Linda Manfredonia, a fiduciary consultant once employed by PNC, testified regarding her historical and legal knowledge of trust creation and administration. See N.T. 2/11/20, at 54-105.
On July 20, 2020, the trial court entered an Adjudication, finding PNC is entitled to five percent income commission pursuant to the fee agreement set forth in the 1954 Tradesmens Letter to Settlor. The court also found that a one-time principal commission of $145,000 is reasonable compensation for PNC's administrative services during the third accounting period. The court further concluded that PNC's attorney's fees and costs associated with its defense of the Third Account are not reimbursable out of trust funds, although PNC's attorney's fees and costs incurred during the third accounting period, including the preparation and filing of the Third Account, are proper expenses to be reimbursed from trust funds.5
PNC timely appealed and filed a court-ordered Pa.R.A.P. 1925(b) Statement. In response, the trial court filed a "Final Decree" indicating that its July 20, 2020 Adjudication fully addressed the issues raised in PNC's Rule 1925(b) Statement.
PNC presents the following Statement of Questions Involved for this Court's review, reordered:
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