Win One for the Fiduciary – The PA Supreme Court Clarifies the Interplay of UTA Provisions

by McNees Wallace & Nurick LLC
Contact

As counsel to fiduciaries across our great Commonwealth, I was beginning to despair that changing one’s trustee was becoming as easy as changing the oil in one’s car.  In the seminal case of Trust Under Agreement of Edward Winslow Taylor, our Pennsylvania Supreme Court pumped the brakes (to continue the metaphor).

Following the Superior Court’s ruling in In re McKinney Trusts, 67 A.3d 824 (Pa. Super. 2013), disgruntled beneficiaries became emboldened and began testing the boundaries of trustee removal in Pennsylvania.  The Taylor Trust presented one such case and when the Superior Court in Taylor opined that trustee removal could be achieved through trust modification, many of us took notice.  Thankfully, the Pennsylvania Supreme Court decided to hear the case.

In Taylor, the Pennsylvania Supreme Court was called upon to determine the interplay between two sections of Pennsylvania’s Uniform Trust Act (UTA), namely sections 20 Pa.C.S. 7740.1 and 7766.  Section 7740.1 is titled “Modification or termination of noncharitable irrevocable trust by consent” and is modeled after section 411 of the Uniform Trust Code (UTC).  Section 7766 is titled “Removal of trustee” and is modeled after section 706 of the UTC.

In summary, the Pennsylvania Supreme Court agreed with the trial court, overturned the Superior Court, and concluded that the scope of section 7740.1 of the UTA does not extend to modification of trust agreements to permit the removal and replacement of trustees; instead, section 7766 is the “exclusive provision” for removal of trustees (a finding consistent with the Comments to section 706 of the UTC).  The high Court concluded that “the UTA does not permit removal and replacement of a trustee without Orphans’ Court approval in accordance with section 7766.”  Opinion, pg. 2.

The beneficiaries of the Philadelphia County Taylor trust commenced the action by petitioning to modify the terms of the trust to add a “portability clause” which would permit them to replace a corporate trustee at any time, at their discretion, without cause or judicial approval.  Wells Fargo, the corporate fiduciary, argued that modification under 7740.1 was essentially a guise to avoid the removal provisions of 7766.  The trial court agreed with the trustee and held that the “beneficiaries’ attempt to use the broad modification provisions in section 7740.1(d) to eviscerate section 7766 must therefore yield to the specific removal provisions in section 7766.”  The Superior Court overturned the trial court’s decision and the PA Supreme Court wisely granted the trustee’s request for discretionary review of the matter.

The Supreme Court’s Opinion should have impact beyond the facts of this particular trust matter.  For those of us who live our professional lives in the PEF Code, the Court’s guidance is invaluable.  In guiding practitioners and fiduciaries who navigate the PEF Code every day, the Court’s discussion and analysis provides a clearer roadmap.  The Court’s analysis of “…whether section 7740.1’s modification power extends to the modification of other statutory provisions of the UTA”, especially in light of the “lack of any explicit language in sections 7740.1 or 7766” is illuminating.  Opinion, pg. 16.  The Court outlined the contrasting  evidentiary hurdles presented in the two competing statutes and noted that the factors to be considered for trustee removal are far more substantial than those considered for trust modification.  The Court also took care to outline prior Pennsylvania law on trustee removal, noting that the Commonwealth “has a long history of strictly limiting the removal and replacement of a trustee…” and that enactment of 7766 reflects the legislature’s “intent to retain these principals in connection with the removal and replacement” of trustees.  Opinion, pgs. 19 and 20.  Inclusion of one “no fault” provision in 7766 “does not reflect any generalized legislative intent to permit beneficiaries to exercise control over the removal and replacement of trustees”, per our Supreme Court.  Opinion, pg. 20.   Each of these statements provides important guidance to practitioners, fiduciaries and beneficiaries alike.

As always in fiduciary cases, facts matter.  The Opinion, authored by Justice Donohue, sets forth the trust terms, amendments to those trust terms as well as the chronology and history of trustee service.  The trust instrument did not expressly provide the beneficiaries with the power to remove the corporate trustee.

The Opinion should be added to the reading list of any student of statutory construction.  Importantly, the Court confirmed that statutes may not be interpreted in isolation and courts must read each section “not by itself, but with reference to, and in light of, the other sections” and that they must be read “harmoniously.”  Opinion, pgs. 13 and 16.

Trustee removal in Pennsylvania has historically been rare with the evidentiary bar set quite high.  This Court continues that precedential axiom, for now.

Link to the Supreme Court’s Opinion


 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McNees Wallace & Nurick LLC | Attorney Advertising

Written by:

McNees Wallace & Nurick LLC
Contact
more
less

McNees Wallace & Nurick LLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.