NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P

Transcription

1 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P IN RE: GLADYS P. STOUT, DECEASED : IN THE SUPERIOR COURT OF : PENNSYLVANIA : : APPEAL OF: PLEASANT VALLEY MANOR : No. 545 EDA 2013 Appeal from the Order Entered January 17, 2013 In the Court of Common Pleas of Monroe County Civil Division at No(s): 97 OC 2010 IN RE: GLADYS P. STOUT, DECEASED : IN THE SUPERIOR COURT OF : PENNSYLVANIA : : APPEAL OF: RONALD BUSKIRK, AS : TRUSTEE OF THE STOUT FAMILY TRUST : No. 688 EDA 2013 Appeal from the Order Entered January 17, 2013 In the Court of Common Pleas of Monroe County Orphans Court at No(s): 97-OC-2010 BEFORE: GANTMAN, J., SHOGAN, J., AND PLATT, J.* MEMORANDUM BY GANTMAN, J.: FILED MARCH 10, 2014 Appellant, Pleasant Valley Manor ( PVM ), appeals from the order entered in the Monroe County Court of Common Pleas, in favor of the Stout Family Trust, in this declaratory judgment action. Appellee/Cross Appellant, Ronald Buskirk, as Trustee of the Stout Family Trust, cross appeals from that order. We affirm. The relevant facts and procedural history of this case are as follows. On November 7, 2003, Gladys Stout transferred real property by deed to her *Retired Senior Judge assigned to the Superior Court.

2 daughter, Shirley Buskirk. That same day, Ms. Buskirk created the Stout Family Trust ( Trust ) by transfer of one dollar into the corpus of the Trust, and transfer of the real property to the Trust by deed recorded in the Monroe County Recorder s Office. The Trust named Ms. Stout and her son, Kevin Stout, as beneficiaries of the Trust. On May 23, 2005, Ms. Buskirk individually, and not as Trustee, recorded a document conveying a life estate to Ms. Stout on the real property in the Trust. After Ms. Buskirk s death on August 4, 2005, her son, Appellee/Cross Appellant, Ronald Buskirk, became the successor Trustee. Meanwhile, on February 9, 2005, Ms. Stout was admitted to PVM for skilled nursing care. Between September 2005 and June 2006, the Trust made three payments to PVM for Ms. Stout s care, believing she would later qualify for Medicaid. Ms. Stout was eventually denied Medicaid, and PVM discharged Ms. Stout on November 2, 2006, for nonpayment. According to PVM, the outstanding principal owed to PVM for Ms. Stout s care is $43,332.16, and the unpaid interest is $116, Nevertheless, PVM has not billed the Trust or the Trustee since February Ms. Stout died on August 31, 2007, followed by her son, Mr. Stout, in January On June 18, 2009, PVM filed a petition for citation for Appellee/Cross Appellant, Ronald Buskirk, as Trustee, to show cause why he should not be ordered to file an accounting of the Trust, and why distribution should not have been made to the Estate of Gladys P. Stout ( Estate ) to pay PVM s - 2 -

3 outstanding balance. At the time PVM filed its petition, an estate had not yet been raised. On July 9, 2009, the Trust filed preliminary objections to PVM s petition. The court sustained the preliminary objections without prejudice on October 21, 2009, to allow an estate to be opened. In June 2010, PVM petitioned the court to open the Estate. The court appointed Shaun O Toole as administrator of the Estate on November 10, The administrator commenced this declaratory judgment action on April 20, 2012, seeking a judicial declaration of the rights, duties, and legal obligations of the Estate, the Trust, and PVM s claims. The administrator joined PVM as an indispensable party on September 12, The court conducted a hearing on October 15, 2012, after which the parties filed posthearing briefs. On January 17, 2013, the court entered an order declaring that PVM is a creditor of the Estate but not of the Trust. Moreover, the court declared that PVM, as a creditor of the Estate, cannot compel payment from the Trust for Ms. Stout s outstanding debt, nor can the Estate compel the Trust to pay debts owed to creditors of the Estate. The court also determined that the four-year statute of limitations for declaratory judgments did not bar the action. No post-verdict motions were filed. On Monday, February 19, 2013, PVM filed a notice of appeal. The court ordered PVM to file a concise statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b), and PVM complied on March 12, - 3 -

4 2013. Appellee/Cross Appellant, Ronald Buskirk, as Trustee, filed a notice of cross appeal on February 28, On March 5, 2013, the court ordered Appellee/Cross Appellant, Ronald Buskirk, to file a Rule 1925(b) statement, and he complied on March 18, our review: At docket number 545 EDA 2013, PVM raises the following issues for WHETHER GLADYS STOUT WAS, IN SUBSTANCE AND REALITY, THE SETTLOR OF THE STOUT FAMILY TRUST AND SHIRLEY BUSKIRK ACTED MERELY AS A STRAW MAN TO TRANSFER GLADYS STOUT S PROPERTY TO THE STOUT FAMILY TRUST. WHETHER [PVM] AND THE ESTATE OF GLADYS STOUT CAN COMPEL PAYMENT FROM THE STOUT FAMILY TRUST. (PVM s Brief at 4). At docket number 668 EDA 2013, Appellee/Cross Appellant, Ronald Buskirk, raises the following issue for our review: WHETHER THE TRIAL COURT ERRED IN FINDING THAT [PVM s] DECLARATORY JUDGMENT ACTION WAS NOT BARRED BY THE FOUR-YEAR STATUTE OF LIMITATIONS? (Appellee/Cross Appellant, Ronald Buskirk s Brief at 1). As a preliminary matter, Rule of the Pennsylvania Rules of Civil Procedure mandates the filing of post-trial motions after jury and bench trials. Pa.R.C.P (c). [P]ost-trial declaratory judgment orders, just like other post-trial orders, are subject to the post-trial motion procedures in Rule Motorists Mut. Ins. Co. v. Pinkerton, 574 Pa. 333, 344, 830 A.2d 958, 964 (2003)

5 Instantly, the court conducted a declaratory judgment hearing on October 15, 2012, and entered its post-trial declaratory judgment order in favor of the Trust on January 17, Nevertheless, neither party filed post-trial motions following the court s verdict. Therefore, both parties issues are waived on appeal. See id.; P.S. Hysong v. Lewicki, 931 A.2d 63, 67 (Pa.Cmwlth. 2007), appeal denied, 596 Pa. 711, 940 A.2d 367 (2007) (reiterating principle that appellant s failure to file post-trial motions in proceeding to which Rule applies results in waiver of issues). Moreover, even if both parties had properly preserved their issues for appeal, PVM would not be entitled to relief. For example, in its first issue, PVM argues Ms. Stout was the true settlor of the Trust and her daughter was merely a straw person used to transfer the property into the Trust. PVM contends Ms. Stout used Ms. Buskirk to shield the property from tax and creditor consequences involved in a self-funded trust. PVM maintains the case is similar to Estate of Sinclaire v. Commissioner of Internal Revenue where the United States Tax Court found it necessary to examine all circumstances of transfers to determine who, in substance and reality, was the settlor of a trust. See Estate of Sinclaire v. Commissioner of Internal Revenue, 13 T.C. 742, (Tax Ct. Nov. 14, 1949). PVM alleges Ms. Buskirk was, in form only, the individual who established the Trust and transferred the property into the Trust. Nevertheless, PVM submits Ms. Stout was, in substance and reality, the settlor of the Trust - 5 -

6 because she furnished the consideration for the Trust s creation. PVM concludes this Court should determine Ms. Stout is the true settlor of the Trust. In response to this proposition, the trial court reasoned as follows: A person who furnished the consideration for the creation of a trust is the settlor, even though in form the trust is created by another person[.] In re Lueders Estate et al., 164 F.2d 128, 132 (3d Cir. 1947) [(citation omitted)] (emphasis added). The Pennsylvania Uniform Trust Act ( PUTA ) defines settlor as: A person, including a testator, who creates or contributes property to a trust. If more than one person creates or contributes property to a trust, each person is a settler of the portion of the trust property attributable to that person s contribution except to the extent another person has the power to revoke or withdraw that portion. 20 Pa.C.S.A Courts have allowed creditors to reach trust assets where the settlor conveys his or her property directly to a trust and continues to use the property for his or her own personal benefit. See Mackason s Appeal, 42 Pa. 330 (1862) (holding creditor could reach trust assets where settlor/debtor transferred certain real estate to the trust but retained a life estate and received all income from the property); Prestige Bank v. [Investment Properties Group, Inc.], 825 A.2d 698 (Pa.Super. 2003) (holding creditor could reach the trust assets where the settler/debtor funded the trust with personal property naming his children as beneficiaries, but the trust instrument permitted the settlor full and unlimited use of the personal property during his lifetime). In this case, Gladys Stout did not furnish the consideration directly to the trust. The trust was originally created by Shirley Buskirk who transferred one (1) dollar as the corpus of the trust. The trust was not created when - 6 -

7 Gladys Stout conveyed her property to Shirley Buskirk. Gladys Stout conveyed her interest in the real property to Shirley Buskirk. Shirley Buskirk then added the property to the trust that had already been created by filing a separate deed. Therefore, Shirley Buskirk is the settlor of the Stout Family Trust. Furthermore, Gladys Stout did not have any control over the distribution of Trust income and principal, as she was a beneficiary, not a trustee. The deed purporting to convey a life estate to Gladys Stout is of no consequence, because it was conveyed by Shirley Buskirk individually, who had no individual interest in the real property at that time. The real property was held by the Trust. This [c]ourt is aware of no statute or case that prohibits the owner of recently acquired property from adding that property to an existing trust, and PVM has cited none. Therefore, the Stout Family Trust is a discretionary trust, not a settlor trust. (Trial Court Opinion, filed January 17, 2013, at 7-8) (internal footnote omitted). The record supports the trial court s disposition of PVM s first issue, which therefore, even if properly preserved, would merit no relief. With regard to its second issue, PVM argues that, if Ms. Stout is the settlor of the Trust, PVM and the Estate can compel payment from the Trust. PVM contends Ms. Stout, as settlor, could have received the entire principal and any income generated from the principal pursuant to the plain language of the Trust. As a creditor of Ms. Stout, PVM reasons PVM and the Estate can reach the entire Trust principal and any income it generates. PVM concludes the court erred by finding neither PVM nor the Estate could compel payment from the Trust to estate creditors. The trial court discussed PVM s second issue as follows: The beneficial estate is not subject to claims of a creditor where the trust document contains a spendthrift provision, - 7 -

8 or where the trust grants to the [t]rustee discretion in making distributions. Girard Life Ins. Co. v. Chambers, 46 Pa. 485 (1864). Because the Stout Family Trust is a discretionary trust with a valid spendthrift clause, PVM cannot reach the assets in the Stout Family Trust to satisfy Gladys Stout s debts. When a trustee has discretion as to the payment of income to a beneficiary, the beneficiary takes nothing until the discretion has been exercised by the Trustee, and his creditors cannot attach or levy upon the anticipated income. Huber s Appeal, 80 Pa. 348 (1876). Pennsylvania courts uphold the spendthrift provisions as a means to enforce the settlor s right to dispose of his property as he so chooses. In re Trust Under Agreement of John Ware, 814 A.2d 725, 731 (Pa.Super. 2002). Furthermore, in a discretionary trust, payment for services provided to a beneficiary cannot be compelled by a creditor in opposition. 20 Pa.C.S.A states that: (b) Distribution not compelled. Except as otherwise provided in subsection (c), whether or not a trust contains a spendthrift provision, a creditor of a beneficiary may not compel a distribution that is subject to the trustee s discretion, even if: (1) the discretion is expressed in the form of a standard of distribution; (2) the trustee has abused the discretion; or (3) the beneficiary is the trustee or a cotrustee of the trust. The Uniform Trust Act at 20 Pa. C.S.A. 7744(b). The Stout Family Trust provides: Trustee shall pay or apply so much of the principal (including accumulated income added thereto) at any time or from time to time, to or for the use and benefit of Trustor s mother, Gladys P. Stout, and Trustor s brother, Kevin D. Stout, in such amounts and proportions whether equal or unequal, and to - 8 -

9 the exclusion of any one or more of such class, and whether the whole thereof or a lesser amount, and at such time or times as Trustee, in Trustee s sole and absolute discretion, shall deem desirable. * * * The interest of the Beneficiaries in the principal and/or income of the Trust shall not be subject to the claim or claims of their creditors or others, nor to legal process, and may not be voluntarily or involuntarily alienated or encumbered. (Stout Family Trust, Section III, p. 4; Section X(b), p. 28). The language contained in Section III, page four (4) of the Stout Family Trust, clearly shows that the beneficiaries do not have any interest in the income or principal of the Trust until the Trustee makes a distribution. Additionally, the Stout Family Trust contains a valid spendthrift clause in Section X(b). It is the clear intent of the settlor, Shirley Buskirk, that the principal and interest of the beneficiaries were to be protected from creditors. Case law also supports the proposition that a creditor of a beneficiary in a spendthrift trust cannot compel distribution by a trustee to the beneficiary. Drevenik v. Nardone, 862 A.2d 635 (Pa.Super. 2004) ([stating exception] where beneficiary seeks to avoid support obligations). Even when a trustee fails to comply with a standard of distribution in a trust, or where the trustee abuses his discretion in failing to make distributions, a non-family member creditor such as PVM, cannot compel distribution in a discretionary trust. 20 Pa. C.S.A. 7744(b)(1) and (c). The Estate cannot compel payment from the Trust either. A beneficiary may be able to compel distribution from a trust. However, in a discretionary trust, the trustee s actions cannot be overturned by a [c]ourt except where there is an abuse of discretion. Seacrist Estate, 362 Pa. 190 (1949). The issue is whether the trustee is acting within the scope of the discretion granted, and whether the - 9 -

10 actions are consistent with the trust document. In re Briggs Estate, 27 A.2d 430 (Pa.Super. 1942). Here, the Trust document requires the Trustee to distribute income and principal to the beneficiaries as the [T]rustee, in Trustee s sole and absolute discretion shall deem desirable. (Trust p. 4). This includes payments for institutional or nursing care expenses per the Trust language. (Trust p. 5). There was no evidence to indicate the Trustee acted outside the scope of the Trust. The Trustee had complete discretion, and the option to preserve Trust assets, even if institutional or nursing care services were needed for either beneficiary. There was no abuse of discretion by the Trustee in failing to pay a creditor of [Ms. Stout] as a beneficiary of the Trust. (Trial Court Opinion at 8-11). The record supports the disposition of PVM s second issue, which therefore, even if properly preserved, would merit no relief. Likewise, even if Appellee/Cross Appellant, Ronald Buskirk, had properly preserved his issue for cross appeal, this issue would now be moot. Accordingly, we affirm. Order affirmed. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 3/10/