In re Taylor, 15 EAP 2016

• Court: United States State Supreme Court of Pennsylvania
• Writing for the Court: JUSTICE DONOHUE
• Citation: 164 A.3d 1147
• Parties: TRUST UNDER AGREEMENT OF Edward Winslow TAYLOR Appeal of: Wells Fargo Bank
• Docket Number: No. 15 EAP 2016,15 EAP 2016
• Decision Date: 19 July 2017

164 A.3d 1147

TRUST UNDER AGREEMENT OF Edward Winslow TAYLOR

Appeal of: Wells Fargo Bank

No. 15 EAP 2016

Supreme Court of Pennsylvania.

ARGUED: March 7, 2017
DECIDED: July 19, 2017

Roberta Ann Burris Barsotti, Esq., Lee Charles Schmeer, Esq., Schnader Harrison Segal & Lewis, LLP, Ralph G. Wellington, Esq., for Wells Fargo Bank, N.A. as Trustee, Appellant.

Jennifer DiVeterano Gayle, Esq., James Francis Mannion, Esq., Mannion Prior, L.L.P., for Elise W. Carr, Edward W. Carr, Ian N. Carr, Appellee.

David R. Fine, Esq., Raymond Paul Pepe, Esq., for Pennsylvania Bankers Association, Amicus Curiae.

John Franklin Meck, Esq., John H. Williams Jr., Esq., Eckert Seamans Cherin & Mellott, LLC, for PA Bankers Association, Appellant Amicus Curiae.

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

OPINION

JUSTICE DONOHUE

We granted discretionary review in this case to determine whether the Superior Court erred in ruling that beneficiaries of the trust of Edward Winslow Taylor (the "Taylor Trust") could modify its terms to add a "portability clause" to permit them to replace the corporate trustee at any time, at their discretion, without cause or judicial approval.¹ The beneficiaries seek modification pursuant to section 7740.1 of the Uniform Trust Act ("UTA"), 20 Pa.C.S. §§ 7701 – 7799.3. The current trustee of the Taylor Trust, Wells Fargo Bank ("Wells Fargo"), contends that the UTA does not permit amendment to add a portability clause, and that instead a trustee may be removed only by a court upon a determination that the more onerous requirements of section 7766 of the UTA, titled "Removal of trustee," have been satisfied. For the reasons that follow, we conclude that the UTA does not permit the removal and replacement of a trustee without Orphans' Court approval in accordance with section 7766. Accordingly, we reverse the Superior Court's decision.

The UTA is Pennsylvania's modified enactment of the Uniform Trust Code ("UTC"), which was approved and recommended by the National Conference of Commissioners on Uniform State Laws. Pennsylvania's Advisory Committee on Decedents' Estates Laws of the Joint State Government Commission ("JSGC") drafted the UTA based upon the 2003 version of the UTC. With these reports and recommendations of the JSGC, the General Assembly enacted the UTA, effective November 6, 2006. The UTA, as part of the Pennsylvania's Probate, Estates and Fiduciaries Code, 20 Pa.C.S. §§ 101 – 8815, constitutes a comprehensive codification of trust law in this Commonwealth, and by its terms applies generally to "all trusts created before, on or after" its effective date. Act of July 7, 2006, P.L. 625, 702, § 16(3).

As indicated above, this appeal requires this Court to consider the interplay between sections 7740.1 and 7766 of the UTA. We set these provisions forth at the

164 A.3d 1150

outset. Section 7740.1 provides, in relevant part, as follows:

§ 7740.1. Modification or termination of noncharitable irrevocable trust by consent

* * *

(b) Consent by beneficiaries with court approval.— A noncharitable irrevocable trust may be modified upon the consent of all the beneficiaries only if the court concludes that the modification is not inconsistent with a material purpose of the trust.

* * *

(d) Consent by some beneficiaries with court approval.— If not all the beneficiaries consent to a proposed modification or termination of the trust under subsection (a) or (b), the modification or termination may be approved by the court only if the court is satisfied that:

(1) if all the beneficiaries had consented, the trust could have been modified or terminated under this section; and

(2) the interests of a beneficiary who does not consent will be adequately protected.

20 Pa.C.S. § 7740.1(b), (d). Section 7766 provides, in relevant part

§ 7766. Removal of trustee

* * *

(b) When court may remove trustee.— The court may remove a trustee if it finds that removal of the trustee best serves the interests of the beneficiaries of the trust and is not inconsistent with a material purpose of the trust, a suitable cotrustee or successor trustee is available and:

(1) the trustee has committed a serious breach of trust;

(2) lack of cooperation among cotrustees substantially impairs the administration of the trust;

(3) the trustee has not effectively administered the trust because of the trustee's unfitness, unwillingness or persistent failures; or

(4) there has been a substantial change of circumstances. A corporate reorganization of an institutional trustee, including a plan of merger or consolidation, is not itself a substantial change of circumstances.

20 Pa.C.S. § 7766(b).

Edward Winslow Taylor, the settlor, established the Taylor Trust by execution of an Agreement of Trust on February 9, 1928, which was twice amended, first on April 20, 1928 and a second time on September 25, 1930. Its stated purpose was to care for his daughter (Anna Taylor Wallace) and her children living at the time of its creation. In the original Agreement of Trust, the settlor named "The Colonial Trust Company or its successors" as the corporate trustee. By the time of the 1930 amendment, Colonial had merged into a successor corporation, and the settlor acknowledged the successor as the new corporate trustee. At the time of Edward Taylor's death in 1939, pursuant to the terms of the Agreement of Trust, Anna Wallace became the co-trustee along with the corporate trustee. Upon Anna's death in 1971, her sole surviving son, Frank R. Wallace, became the co-trustee. Frank Wallace, Jr. died in 2008 and was survived by four children. Anthony T. Wallace was next in line to serve as co-trustee, but he renounced the appointment. In 2009, Wells Fargo, which, through a series of subsequent mergers, had become the corporate trustee, sought court approval to divide the Taylor Trust into four separate and equal trusts, one for each of Anna Wallace's surviving grandchildren. The Orphans' Court approved the request, appointing each of the four grandchildren as the co-trustee of his or her separate trust.

The Taylor Trust is irrevocable and terminates in 2028. The trust document executed

164 A.3d 1151

in 1928 permitted the corporate trustee, in its judgment, to deplete the principal for the benefit of Anna Wallace or her children. In the 1930 amendment, however, this power was eliminated to provide only for the distribution of income. The trustees have common powers over trust management, including discretion regarding investments. While the 1928 version of the Agreement of Trust provided that disputes would be resolved by arbitration, the 1930 amendment removed that provision. The Agreement of Trust states that if the position of corporate trustee becomes vacant "as a result of the resignation, removal or inability to act," the settlor (if alive) or the beneficiary may appoint a new one, with the only limitation being that the new trustee "shall be a recognized banking institution in the City of Philadelphia, Pennsylvania." Petition to Modify Trust Agreement, 9/4/2013, at Ex. A, ¶ FIFTEEN.² Importantly for present purposes, the above reference to the removal of the corporate trustee is not defined or further explained, and the Agreement of Trust does not expressly provide the beneficiaries with any power to remove the corporate trustee.

On September 4, 2013, three of Anna Wallace's surviving grandchildren, Elise W. Carr, W. Sewell Wallace and Christopher G. Wallace (collectively, "Beneficiaries"), citing to section 7740.1 of the UTA, petitioned the Philadelphia Orphans' Court to modify the Taylor Trust. Specifically, they sought to add a portability provision giving themselves the power, without court approval, to remove the corporate trustee "[f]rom time to time and without cause" and to appoint a new corporate trustee of their choosing. Petition to Modify Trust Agreement, 9/4/2013, ¶ 24. In particular, the Beneficiaries proposed that the following language be added to paragraph fifteen of the Agreement of Trust:

A. The Trustee is hereby authorized to resign as Trustee of this Trust upon giving ninety day's [sic] written notice of such resignation, duly signed and acknowledged by one of its officers, and delivered personally or by registered mail to the beneficiaries of the Trust. Upon such resignation or other termination of this Trust, the Trustee may account for its administration of said Trust to the beneficiaries, and, upon so accounting to the satisfaction of the beneficiaries, may be discharged from liability hereunder without any application to, or action by, any Court. In the case of resignation or inability to act of the Trustee, a majority of the sui juris income beneficiaries shall thereupon appoint in writing a substitute Corporate Trustee, which substitute Corporate Trustee shall be located in Pennsylvania.

164 A.3d 1152

B. From time to time and without cause, the income beneficiaries who are then sui juris may remove any Corporate Trustee acting hereunder by a writing delivered to such Corporate Trustee stating the effective date of the removal, provided that if there are then five or fewer sui juris income beneficiaries, all sui juris income beneficiaries must consent in

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