A trust will follow the same rules as estates and corporations when it comes to determining whether an attorney is required to initiate or fight litigation, an Adams County Court of Common Pleas judge has ruled.
Judge John D. Kuhn ruled in Straban Township v. Hanoverian Trust that the defendant trust must retain an attorney to fight Straban Township’s lawsuit seeking an injunction to remove people from an estate the trust allegedly owns. Defendant Heywood Becker, a trustee of the Hanoverian Trust, had filed preliminary objections to the township’s complaint, but the township argued that the trust could only be represented by an attorney.
“Our research has not revealed the golden nugget of stare decisis that all legal researchers seek. Nevertheless, there is sufficient body of law which supports the township’s position,” Kuhn said. “The trustee here should be the one who has the duty to decide whether to prosecute, defend or settle litigation and may be the one who engages counsel. He is not, however, the one who can make legal argument on behalf of the trust.”
In his order released March 27, Kuhn said the township had filed a complaint against the Hanoverian Trust and trustees Becker and Lisa M. Phillips, alleging that the trust owned an estate in Straban Township, which had formerly been used as a motel, and that the trust had allowed people, including Phillips, to live in the structure in violation of the township’s regulations.
Becker filed a preliminary objection, which Kuhn said appeared to be on his own behalf but could have been filed as a trustee of the estate. In the filing, Becker claimed he was an owner of the real estate.
Straban Township then sought to compel Becker to obtain counsel, arguing that the trust needed to be represented by an attorney authorized to practice law in the state.
Although neither party noted any cases directly on point, Kuhn said, several decisions out of the state appellate courts were persuasive.
Kuhn noted the state Superior Court’s 1984 decision in Walacavage v. Excell, in which it found that a corporation can only appear in court through an attorney. According to Kuhn, the court reasoned that those who accept the benefits of incorporation must also bear the burden, including retaining counsel to appear in court.
The Superior Court’s 1994 case Kohlman v. Western Pennsylvania Hospital dealt with whether an appointed power-of-attorney could pursue an action on behalf of a principal, and framed the issue as whether an unlicensed in-court representation of another is prohibited under the state’s statutes against unlicensed practice of law, Kuhn said. The court ultimately determined that while the Probate Code authorized an agent to act in an attorney’s capacity with respect to probate and administrative matters, the code did not permit the agent to practice law, and therefore the attorney-in-fact could not pursue the action for the plaintiff. According to Kuhn, the court said that finding otherwise would circumvent the licensing and admission requirements.
“Thus, an agent may stand in the shoes of the principal in deciding whether to prosecute, defend, settle or arbitrate a claim belonging to the principal and may control the attorney-client relationship. However, the agent lacks authority to litigate pro se in the principal’s stead,” Kuhn said.
Kuhn also examined the Superior Court’s decision in Petition of Lawrence County Tax Claim Bureau, in which the court found that while a partnership is generally different than a corporation, a limited partnership is somewhat “quasi-corporate,” and can only act through its designated representative, the general partner. The court noted that the general partner has unlimited liability, and found that the general partner of a company was entitled to object to a tax sale in his name and on behalf of the partnership.
The Commonwealth Court’s 2013 decision in Tax Claim Bureau of Westmoreland County addressed whether a decedent’s estate needed to be represented by an attorney, Kuhn said. In that case, Kuhn said, the court held that the estate was like a corporation and could not be represented in court without a licensed attorney. The court used the test outlined in the state Supreme Court’s 2007 decision in Harkness v. Unemployment Board of Review to determine that the estate administrator could not represent the estate in legal proceedings before the court, Kuhn said. The test determines what constitutes practice of law.
“Applying the principles from these cases we must conclude that the trust must be represented by counsel,” Kuhn said.
According to Kuhn, the exact nature of the Hanoverian Trust was unclear, but it appeared to have aspects of a Pennsylvania business trust. Beneficiaries of business trusts get the same limited liability as shareholders of a corporation, and the state Rules of Civil Procedure consider business trusts to be a “corporation or similar entity,” Kuhn noted.
Following the Commonwealth Court’s lead from Tax Claim Bureau of WestmorelandCounty, Kuhn determined that, under the Harkness test, pursuing the case would constitute the practice of law.
“A trust, like a corporation or an estate, can only act through its agent, the trustee,” Kuhn said. “Allowing a trustee to represent the trust before the court by filing pleadings and briefs and engaging in legal argument raises all the concerns regarding unauthorized practice of law raised in the above cases.”
A call to Straban Township’s attorney, Walton V. Davis, was not returned. Contact information for Heywood Becker was unavailable.
(Copies of the 11-page opinion in Straban Township v. Hanoverian Trust, PICS No. 14-0569, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •