A woman has been allowed to remove PNC Bank as her trustee because her move away from Pennsylvania and a spate of corporate mergers were a "substantial change in circumstances" allowing her to switch trustees under the new no-fault provision in the probate code, the state Superior Court has ruled.
In taking the first crack at the new no-fault provision in Pennsylvania’s Probate, Estates and Fiduciaries Code, the Superior Court had to consider what is required of trusts’ beneficiaries who are trying remove a corporate entity as trustee.
The unanimous three-judge panel’s decisions in In re Donald L. McKinney and In re Jane McKinney Descendants’ Trust concluded that Jane D. McKinney, the petitioner and beneficiary of two trusts, fell within the no-fault provision.
The court also analyzed other factors required by the law, an issue of first impression following legislative changes, en route to reversing a Crawford County judge who refused to remove PNC Bank as trustee to the trusts and awarded the bank attorney fees related to litigating the removal petition.
Before 2006, Pennsylvania law required a person seeking trustee removal to show fault or negligence on the part of the trustee. But as part of amendments to the PEF Code, making Pennsylvania a no-fault state, that standard loosened.
Under the new law, found at 20 Pa.C.S.A. Section 7766(b)(4), a petitioner seeking trustee removal must show by clear and convincing evidence four things: the removal serves the beneficiaries’ best interests; the removal is not inconsistent with the "material purpose" of the trust; the successor trustee is suitable; and, lastly, that a "substantial change in circumstances" has occurred. Writing for the court, Judge David N. Wecht resolved all but the suitability prong, ordering the trial court on remand to make a "definitive finding" in that regard.
In resolving the best interests prong, Wecht turned to a prefatory comment in Chapter 77 of the PEF Code, in the absence of case law on the issue. Chapter 77 is based on the Uniform Trust Code, which sets forth that the language of a trust should define the beneficiaries’ interests, not the beneficiaries themselves.
Remaining unclear, though, was how courts should utilize language within the trust in determining those interests.
Turning to other states’ jurisprudence for guidance, Wecht came up with the following list, with the wording as stated in Wecht’s 26-page opinion left intact: personalization of service, cost of administration, convenience to the beneficiaries, efficiency of service, personal knowledge of trusts’ and beneficiaries’ financial situations, location of trustee as it affects trust income tax, experience, qualifications, personal relationship with beneficiaries, the settlor’s intent as expressed in the trust document and any other material circumstances.
Wecht called the list non-exhaustive and said no one factor on it shall outweigh any other. Trial courts, he said, are to determine the factors as parties present evidence on them and on a case-by-case basis.
In the instant cases, McKinney brought several of the above factors to the court’s attention in claiming that SunTrust Delaware Trust Co., and not PNC, best serves the beneficiaries’ interests.
Among them were the fact that McKinney’s mother and father, each a respective settlor for the trusts in question, only formerly had a relationship with original trustee Bank and Trust. The settlors’ relationships with the banks survived through approximately six mergers, but did not remain after PNC assumed the role of trustee, Wecht said McKinney argued.
McKinney argued SunTrust was a suitable trustee, as it handles four other estates tied to the family.
Wecht was not persuaded by what he called the "little countervailing evidence" offered by PNC.
Namely, PNC argued SunTrust lacks experience handling Pennsylvania trusts, but Wecht responded that Pennsylvania law now poses "no distinct peculiarities" to set it apart from other states. It further argued that McKinney’s "’friendly’" relationship with SunTrust would allow her to influence the administration of the trust; Wecht said that while the trial court found that argument convincing, it was ultimately unsupported by the record.
Next, Wecht turned to an analysis on the "material purpose" prong, concluding McKinney met her burden of proof that removal of PNC was not inconsistent with a material purpose of the trusts.
Wecht again turned for guidance to commentary in the Uniform Trust Code, in which the law offers deference in the form of "considerable weight" to a person elected trustee by a settlor.
But the settlors to the trusts at hand did not pick a person, Wecht said. They picked a bank that initially had members of their family on the board, but as time passed the bank underwent several mergers while members of the family became less and less involved in the banking industry.
"With each merger, the trusts became further removed from the original trustee," Wecht said. "The process of attenuation is complete."
According to Wecht, the trial court was persuaded that a material purpose of the trusts was that they be governed by a Pennsylvania institution. Specifically, one of the trusts expressly provided that any successor to PennBank, the original bank, would replace it as trustee. The other one did not name a successor trustee. That said, the trial court found both settlors would have been aware that banks often merge, concluding that if either settlor had intended the trustee would be subject to removal for the mere convenience of their beneficiaries, they would have specified that in the paperwork.
Wecht disagreed, saying: "To read the absence of an express intention to permit portability as disallowing portability would render Section 7766(b)(4) a nullity."
Lastly, Wecht considered whether McKinney had established that a substantial change in circumstances had occurred.
While there is no case law on the precise subject, Wecht said it was clear from the Uniform Trust Code that a merger or reorganization alone did not constitute a change in circumstances. But the totality of circumstances in the instant cases did constitute such a change.
"After careful consideration, we find under the circumstances of this case that a string of mergers over several years, resulting in the loss of trusted bank personnel, coupled with the movement of a family from Pennsylvania to Virginia, constitutes a substantial change in circumstances," Wecht said.
He cited evidence McKinney offered that PNC did not deliver on the customer service front and three bank officers whom she had come to know no longer worked there, Wecht said.
According to Wecht, as the service component went on the decline in between the fall of 2009 and the spring of 2010, it turned out that McKinney’s financial planning needs went up because she inherited her grandmother’s $10 million estate.
Viewed in conjunction with the family’s collective relocation to Virginia, the court concluded there was a substantial change in circumstances.
The panel, which also included Senior Judges John L. Musmanno and Robert E. Colville, removed PNC and reversed the trial court’s award of attorney fees to PNC without prejudice to the bank’s right to counsel fees after more proceedings.
The court ordered the trial court to make a definitive finding as to the suitability of SunTrust as a successor trustee.
Charles J. Avalli of Gentile, Horoho & Avalli in Pittsburgh represented McKinney.
Avalli said the plaintiff was "vindicated" when her analysis was accepted by the court and was grateful the court fleshed out the otherwise untouched area of the law.
Kenneth E. Lewis of Fox Rothschild in Pittsburgh represented the bank and did not return a call seeking comment.
(Copies of the 26-page opinion in In re Donald L. McKinney, PICS No. 13-1147, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •