Sutliff v. Sutliff

• Decision Date: 04 April 1985
• Docket Number: No. 2495,No. 2423,2423,2495
• Parties: Carlene S. SUTLIFF, Appellant at, v. Gregory L. SUTLIFF and Fred K. Collins, Appellants atCarlene S. SUTLIFF, v. Gregory L. SUTLIFF, Appellant. COMMONWEALTH ex rel. Carlene SUTLIFF, v. Gregory L. SUTLIFF. Appeal of Carlene S. SUTLIFF.
• Court: Pennsylvania Superior Court

Page 764

489 A.2d 764

339 Pa.Super. 523

Carlene S. SUTLIFF, Appellant at No. 2423, v. Gregory L. SUTLIFF and Fred K. Collins, Appellants at No. 2495.

Carlene S. SUTLIFF, v. Gregory L. SUTLIFF, Appellant.

COMMONWEALTH ex rel. Carlene SUTLIFF, v. Gregory L. SUTLIFF.

Appeal of Carlene S. SUTLIFF.

Superior Court of Pennsylvania.

Argued Feb. 1, 1984.

Filed Jan. 30, 1985.

Reargument Denied April 4, 1985.

[339 Pa.Super. 531] Ronald Katzman, Harrisburg, for appellant (at 2423, 3168 and 3208) and for appellee (at 2495 and 3117).

Bonnie D. Menaker, Harrisburg, for appellants (at 2495 and 3117) and for appellees (at 2423, 3168 and 3208).

Before SPAETH, President Judge, and BECK and HOFFMAN, JJ.

BECK, Judge:

INTRODUCTION

Since the separation of Carlene S. Sutliff (hereinafter Wife) and Gregory L. Sutliff (hereinafter Husband) in October, 1981, the affairs of the family have been embroiled in litigation. A divorce action is currently pending in the courts of Cumberland County; this court en banc resolved certain issues pertaining to alimony pendente lite in Sutliff v. Sutliff, 326 Pa.Super. 496, 474 A.2d 599 (1984). We now have before us for disposition several appeals linked by the common issue of the manner and extent to which funds gifted to the Sutliffs' children pursuant to the Pennsylvania Uniform Gifts to Minors Act, 20 Pa.C.S. § 5301 et seq. (hereinafter UGMA), may be used in determining and fulfilling the parents' support obligations. This is an issue of first impression in Pennsylvania.

Nos. 2423 and 2495 Philadelphia 1982 are cross-appeals from the final decree of the Court of Common Pleas of Cumberland County, Orphans' Court Division, in an action brought by Wife pursuant to sections 5308(e) and 5309(a) of the UGMA, 20 Pa.C.S. §§ 5308(e), 5309(a). In this action, Wife sought to remove Husband and Fred K. Collins (hereinafter Collins), a business associate of Husband, as custodians of the children's funds and appoint a trust company as successor custodian, on the grounds that Husband and Collins had acted improperly in using the custodial funds to meet Husband's court-ordered support obligation and other child support expenses. Wife also requested an accounting and asked that the custodians be surcharged for the amounts improperly expended. Husband and Collins denied any impropriety and counterclaimed for attorney's fees. The lower court denied Wife's request for an accounting and refused to remove the custodians or surcharge them. The court also denied the request of Husband and Collins for attorney's fees. Both parties appealed.

The remaining appeals relate to a support action commenced by Wife in November 1981. At Nos. 3117 and 3168 Philadelphia 1982, the parties cross-appeal the lower court's October 4, 1982 order awarding $300 per week for Wife's support and $600 per week for the support of the couple's three daughters. Husband's appeal raises, inter alia, the issue whether the court erred in entering a support order "in favor of children who are independently wealthy and who are economically independent", referring in his argument both to the children's assets held by Husband and Collins as custodians under the UGMA and to the children's income from Clifford trusts. In response, Wife contends that the children's assets do not diminish Husband's duty to support his children out of his substantial assets and income. Wife's cross-appeal raises the issue of the proper effective date of the support order.

Finally, in No. 3208 Philadelphia 1982, Wife appeals from a November 5, 1982 order of the trial court modifying its October 4, 1982 order. The modified order provided that the oldest daughter's college fees and other expenses shall be paid by Husband out of her custodial accounts. Wife's appeal challenges the jurisdiction of Although the appeals from the original and modified support orders involve a number of issues, our holding on the issues concerning the custodial funds is of primary importance in determining the disposition of these appeals. Accordingly, in the interests of clarity and judicial economy we shall handle all the foregoing appeals together in this opinion.

the court to enter the modified order, and on the merits raises the question whether it was proper for the court to order the payment of college expenses for a child over eighteen years of age out of custodial funds.

FACTUAL BACKGROUND

A brief outline of the factual background is necessary to place the issues in context. The Sutliffs were married in 1960. They have four children: Gregory M., age 23; Kimberly, age 20; Julia, age 17; and Laura, age 12. ¹ Husband is a highly successful automobile dealer. His income in 1981 was well in excess of $130,000 and his net worth is approximately three million dollars. Wife is a physician. She stopped working shortly after Laura's birth and did not resume her career until 1980. She then took a part-time position as an emergency room physician earning approximately $26,000 per year. She decided to work only part-time in order to have more time at home with the children (Laura and Julia live with Wife, as does Kimberly when she is home from college).

The assets held by Husband and Collins were gifted by Husband and his parents. In 1981 the total value of the assets held by the custodians for all four children was over $466,000. The assets were divided among the children as equally as possible.

On November 4, 1981, shortly after the separation, Wife filed a complaint for support for herself and the three daughters. The court entered an interim order on December 3, 1981 providing for $400 per week support for the children and no support for Wife. Husband began making three-fourths of the payments to the Domestic Relations Office pursuant to this order from the children's accounts of which he was the custodian. At the same time he also began to pay for various other items for the children from the custodial accounts, including small items like magazine subscriptions. On February 17, 1982, Wife commenced the orphans' court action seeking removal of Husband and Collins as custodians. The court issued its decree in that action denying Wife's petition on August 5, 1982. On October 4, 1982, the court entered a further order in the support action which provided for $300 per week support for Wife and $600 per week support for the children.

This order was modified on November 5, 1982. The modified order provided that Kimberly's college costs and incidental expenses be paid by Husband out of her custodial accounts, and awarded $400 per week support for Julia and Laura. The provisions relating to support for Wife remained unchanged. In fashioning the original and modified support orders, the lower court restated and applied its earlier holding that the custodial funds could be used to meet the child support obligation. The appeals of Wife from the October 4, 1982 support order and the November 5, 1982 modified support order challenge the propriety of using custodial funds in this manner.

EFFECT OF UGMA ON SUPPORT OF CHILDREN UNDER 18

Taken together, these appeals present a multifaceted question concerning the proper role of assets held by custodians under the UGMA in child support proceedings. The appeals in the support action raise the issue of how, if at all, such assets should be considered by the court in assessing the These are issues of first impression in our courts. Although both sides claim the Pennsylvania Supreme Court's plurality decision in Schwartz Estate, 449 Pa. 112, 295 A.2d 600 (1972), supports their position, it is more accurate to say that the supreme court in that case sidestepped the issue. Even if Schwartz were on point, we recognize it as a plurality opinion and therefore not controlling. In Schwartz, the precise question before the court was whether assets held by a decedent as custodian for his minor children under the UGMA were subject to his widow's right of election. Under the applicable statutory provisions at the time, the assets which the decedent conveyed to himself as custodian were subject to the election if decedent retained a "power of consumption" of the principal. In reaching the conclusion that a custodian under the UGMA did not retain such a power of consumption, the plurality expressly avoided deciding whether a donor-custodian could properly substitute custodial funds for his legal obligation to support his minor children, because the plurality believed that even if such use were permitted, it would not constitute a power of consumption. See 449 Pa. at 115 n. 2, 295 A.2d at 603 n. 2. In the same footnote, though, the plurality did express doubts that the UGMA could be so construed, stating that "[t]he plain meaning of the language does not indicate that the custodian can use the proceeds of the fund in lieu of an independent prior support obligation." Id. ²

needs of the child and (if the custodian is a parent) the parents' ability to pay, and therefore ultimately in setting the amount of the support order. The appeal in the orphans' court case requires us to determine if and when a parent may use the custodial assets and income to satisfy an existing court-ordered support obligation.

We believe that the issues in the case sub judice are best resolved by interpreting the UGMA in light of its purposes and the policies underlying our law of child support. The primary goal of the UGMA was to simplify the procedure for giving securities or money to minors; a great deal of the impetus for its adoption came from the securities industry. See Newman, The Uniform Gifts to Minors Act in New York and Other Jurisdictions--Tax Consequences, Possible Abuses, and Recommendations, 49 Cornell L.Q. 12 (1963). To achieve this goal, the statute gives the custodian broad discretion with respect to the investment and expenditure of custodial assets, and allows third parties (such as banks and brokers) to deal with the custodian free from liability and without any duty...