In re Tr. Established Under Agreement of Sarah Mellon Scaife, Deceased Dated May 9, 1963, 722 WDA 2021

CourtSuperior Court of Pennsylvania
Writing for the CourtMURRAY, J.
Citation2022 PA Super 93
Decision Date23 May 2022
Docket NumberJ-A06008-22,722 WDA 2021
PartiesIN RE: TRUST ESTABLISHED UNDER AGREEMENT OF SARAH MELLON SCAIFE, DECEASED DATED MAY 9, 1963 APPEAL OF: PNC BANK, N.A.

2022 PA Super 93

IN RE: TRUST ESTABLISHED UNDER AGREEMENT OF SARAH MELLON SCAIFE, DECEASED DATED MAY 9, 1963 APPEAL OF: PNC BANK, N.A.

No. 722 WDA 2021

J-A06008-22

Superior Court of Pennsylvania

May 23, 2022


Appeal from the Order Entered May 25, 2021 In the Court of Common Pleas of Allegheny County Orphans' Court at No. 02-20-2506

BEFORE: MURRAY, J., SULLIVAN, J., and COLINS, J. [*]

OPINION

MURRAY, J.

In this collateral appeal pursuant to Pa.R.A.P. 313, [1] we consider whether the fiduciary exception to the attorney-client privilege and attorney work product doctrine, first adopted by the common pleas court in Follansbee v. Gerlach, 56 Pa. D. & C.4th 483 (C.C.P. Allegheny 2002), is contrary to the law in Pennsylvania, following our Supreme Court's plurality decision in In re Estate of McAleer, 248 A.3d 416 (Pa. 2021) (McAleer II).

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PNC Bank, N.A. (PNC or Appellant), corporate trustee of the 1963 Trust (Trust) established under the agreement of Sarah Mellon Scaife, deceased, appeals from the order granting the motion to compel discovery filed by David Zywiec (Zywiec), the personal representative of the Estate of Jennie K. Scaife (collectively, the Estate). Because we conclude a fiduciary exception is not contrary to Pennsylvania law, we affirm the orphans' court's order compelling discovery.

Factual History

On May 9, 1963, Sarah Mellon Scaife settled the Trust for the benefit of her grandchildren, their issue, their spouses, the spouses of their issue, and charitable organizations. Petition for Adjudication, 6/1/20, Rider to Item 7. From the Trust's inception through March 31, 1984 (the charitable period), the trustees were required to make annual distributions of the Trust's net income to charitable organizations. Trust, 5/9/63, Article II. Any time after the end of the charitable period, the Trust authorized the trustees to create separate trusts for any income beneficiary, any time after the end of the charitable period. Trust, 5/9/63, Article V, § 5.01. After the charitable period, the Trust authorized distribution of net income to the income beneficiaries. Id. § 5.02. The Trust defined income beneficiaries as the grandchildren of the donor, their spouses, the issue of grandchildren, spouses of such issue, and (in the trustees' discretion) "Charity." Id. §§ 1.07, 4.01.4.

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In April 1984, at the end of the charitable period, the Trust began distributing net income to the only income beneficiaries at that time, Jennie K. Scaife (Jennie) and her brother, David N. Scaife (David). Estate's Objections to Account, 9/21/20, ¶ 3. Appellant became a successor corporate trustee of the Trust in 1993. Id. ¶ 6. David married in 1997 and had two children; David's spouse and children also became income beneficiaries. Id. ¶ 7. Jennie remained unmarried and childless until her death. Id. ¶ 6.

Over the years, the trustees issued equal distributions to David and Jennie. Id. ¶ 11. Jennie died from long-term ailments on November 29, 2018, at the age of fifty-five. Id. ¶¶ 6, 11. On March 1, 2019, the Estate, through Zywiec, requested the trustees transfer Jennie's beneficial share of the Trust to her Estate. Id. In February 2020, in accordance with Jennie's will, Zywiec established the Jennie K. Scaife Charitable Foundation, Inc. (Foundation). Upon learning that trustees did not create a separate trust for Jennie, Zywiec requested documentation regarding the trustees' exercise of discretion when it deemed separate trusts unnecessary. Id. ¶ 12.

On April 27, 2020, Zywiec and the Foundation filed a complaint against Appellant, as corporate trustee of the Trust, and Matthew A. Groll (Groll), Blaine F. Aikin (Aikin), Frederick G. Wedell, Corbin P. Miller and Laura B. Gutnick (Gutnick) (collectively, Individual Trustees), the individual trustees of the Trust (PNC and Individual Trustees collectively referred to as Trustees). Zywiec averred Trustees had breached their fiduciary duty to Jennie by not

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creating a separate trust for her benefit. See Jennie K. Scaife Charitable Found. v. PNC Bank, N.A., No. 2:20-cv-617-NR-LPL, 2021 U.S. Dist. LEXIS 41195 (W.D. Pa. Mar. 5, 2021), The federal court ultimately abstained from exercising jurisdiction. See id. *8-9.

Trustees' First and Final Account

On June 1, 2020, Trustees filed their First and Final Account of the Trust from March 22, 1994, through December 31, 2019 (Trustees' Account). Trustees' Account, 6/1/20. Trustees additionally filed a Petition for Adjudication, presenting the following issue:

Whether Trustees not creating a "Separate Trust" for the benefit of beneficiary Jennie K. Scaife before her death on November 29, 2018, constituted a breach of Trustees' fiduciary duties under the Trust Agreement and Pennsylvania law. The [E]state of Ms. Scaife, along with a charitable foundation the [E]state founded, contends that Trustees breached their fiduciary duties and harmed the [E]state (and the foundation) by not exercising their power to create a "Separate Trust" under Article V of the Trust instrument for the benefit of Ms. Scaife before her death. Trustees deny any such breach of fiduciary duty

Petition for Adjudication, 6/1/20, ¶ 14.

On September 21, 2020, David and his son, David G. Scaife, both income beneficiaries, filed an objection challenging Trustees' assertion that the orphans' court could compel Trustees "to split the Trust" and the Trust could "now be divided." Scaifes' Objection, 9/21/20.

The Estate filed objections to the Account (Estate's Objections) on September 21, 2020. The Estate claimed Trustees had violated their fiduciary

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duty to Jennie by: (a) not exercising their discretion and determining whether separate trusts were necessary to protect the income beneficiaries' interests; (b) not acting in good faith, in violation of the Uniform Trust Act ("UTA");[2] and (c)favoring David's interests over those of Jennie. Id. ¶ 14 (a)-(c).

Individual Trustees and Appellant filed answers and new matters denying they had breached their fiduciary duty to income beneficiaries. Appellant's Answer and New Matter, 10/21/20, ¶ 1; Individual Trustees' Answer and New Matter, 10/21/20, ¶ 1. Appellant explained that in April 2017, Jennie and David did not ask for the termination of the Trust or the creation of separate trusts. Appellant's Answer and New Matter, 10/21/20, ¶ 3. Appellant further denied breaching its fiduciary duties regarding the failure to create separate trusts. Id. ¶ 5.

Discovery

On October 26, 2020, the Estate filed its first motion to compel production of the following categories of documents:

(1) Documents spanning the entire Accounting Period and not limited to the 30-month period in 20 Pa.C.S.A. § 7785; (2) PNC's manuals and memoranda concerning its conflict policies; (3) documents concerning the Trust's investments in its affiliates Blackrock and iShares; (4) documents concerning the legal services provided to the Trust by the law firm of Strassburger McKenna .., and the appointment of its shareholders E.J. Strassburger [(Strassburger)] and [] Gutnick as trustees; and (5) documents concerning the retention of a payment to Independent
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Fiduciary Services Consulting Services Management. As discussed herein, there is no basis for the Trustees to withhold any of these documents-which all concern the administration of the Trust-from the Estate, which is their beneficiary.

First Motion to Compel, 10/26/20, at 2 (unnumbered) (footnote omitted).

On November 5, 2020, the orphans' court entered an order directing Trustees to produce all documents related to the legal services provided by Strassburger McKenna, and the appointment of Strassburger and Gutnick as trustees. Orphans' Court Order, 11/5/20, at 1-2 (unnumbered). The orphans' court ordered production of the documents by November 17, 2020, and directed the filing of discovery motions by the close of business on November 19, 2020. Id. at 2 (unnumbered).

The Estate filed a second motion to compel on November 19, 2020. After a hearing, the orphans' court granted the Second Motion to Compel. Orphans' Court Order, 12/3/20.

On January 8, 2021, Appellant and Individual Trustees lodged objections to the Estate's notice of intent to subpoena documents from Strassburger McKenna. Appellant's objections stated, in full:

Pursuant to Pennsylvania Rule of Civil Procedure 4009.21(c), trustee PNC Bank, N.A. ("PNC") objects to the proposed subpoena that is attached to these Objections as Exhibit A because it calls for the production of documents protected by the attorney-client privilege, the work product doctrine, and/or other applicable legal privilege or protection. Production of the categories of documents requested in the proposed subpoena would waive PNC's privilege without its consent.
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Appellant's Objections to Notice, 1/28/21, at 2. Individual Trustees' objections included an identical general assertion of privilege and the work product doctrine. See Individual Trustees Objections, 1/28/21, at 1.

On February 23, 2021, the Estate filed its third motion to compel. Relevant to this appeal, the Estate sought production of unredacted versions of previously produced documents, in accordance with a common pleas court's decision in Follansbee and the Pennsylvania Superior Court's decision in In re Estate of McAleer, 194 A.3d 587 (Pa. Super. 2018) (McAleer I). Third Motion to Compel, 2/23/21, ¶ 8. According to the Estate, PNC produced its privilege log identifying 767 documents withheld and/or redacted.[3] The Estate asserted:

The Estate raised concerns with this privilege log during the recent meet-and-confer. These issues included: logged documents that do not identify an attorney as an author or recipient; the inclusion of documents where an attorney is only one of many people copied on the transmission; not providing enough information to ascertain the subject matter
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