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IRREVOCABLE INTER VIVOS TRUST AGREEMENT WILLIAM HANLEY v. JAMES M. BIRD (10/15/82)

filed: October 15, 1982.

IN RE IRREVOCABLE INTER VIVOS TRUST AGREEMENT OF WILLIAM HANLEY, DECEASED. APPEAL OF TULLAH HANLEY, ADMINISTRATORS OF ESTATE OF MARIE HANLEY, HEIRS OF ANNA BIRD, COMMONWEALTH OF PENNSYLVANIA, HEIRS OF GLADYS H. LEAHY, DENNIS HILLIER, GUARDIAN AD LITEM FOR WILLIAM L. HANLEY, JR., AND EXECUTORS OF ESTATE OF JEAN F. DORN. WILBUR J. SIEBERT AND GUY MCKITTRICK, ADMINISTRATORS OF THE ESTATE OF MARIE HANLEY, DECEASED
v.
JAMES M. BIRD, LEE HANLEY, RICHARD G. LEAHY, SUBSTITUTE TRUSTEES UNDER DECLARATION OF TRUST FOR MARIE HANLEY, DECEASED, LEON J. LEAHY AND MANUFACTURERS AND TRADERS TRUST COMPANY, TRUSTEES UNDER WILL OF GLADYS H. LEAHY, TULLAH INNES HANLEY AND BENNETT FRIEDMAN, SURVIVING EXECUTORS OF THE ESTATE OF THOMAS EDWARD HANLEY, JAMES M. BIRD AND RUTH A. MCCREADY, EXECUTORS OF THE ESTATE OF J.W. BIRD, WILLIAM L. HANLEY, BARBARA L. REGAN, RICHARD LEAHY, WILLIAM H. BIRD, JOHN E. BIRD, JAMES M. BIRD, THOMAS E. BIRD, JOANNE BIRD DORN, JEAN FORSTER DORN, TULLAH INNES HANLEY, LEON J. LEAHY. APPEAL OF TULLAH HANLEY, COMMONWEALTH OF PENNSYLVANIA. WILBUR J. SIEBERT AND GUY MCKITTRICK, ADMINISTRATORS OF THE ESTATE OF MARIE HANLEY, DECEASED V. JAMES M. BIRD, LEE HANLEY, RICHARD G. LEAHY, SUBSTITUTE TRUSTEES UNDER DECLARATION OF TRUST FOR MARIE HANLEY, DECEASED, LEON J. LEAHY AND MANUFACTURERS AND TRADERS TRUST COMPANY, TRUSTEES UNDER WILL OF GLADYS H. LEAHY, TULLAH INNES HANLEY AND BENNETT FRIEDMAN, SURVIVING EXECUTORS OF THE ESTATE OF THOMAS EDWARD HANLEY, JAMES M. BIRD AND RUTH A. MCCREADY, EXECUTORS OF THE ESTATE OF J.W. BIRD, WILLIAM L. HANLEY, BARBARA L. REGAN, RICHARD LEAHY, WILLIAM H. BIRD, JOHN E. BIRD, JAMES M. BIRD, THOMAS E. BIRD. APPEAL OF DENNIS W. HILLIER, GUARDIAN AD LITEM FOR WILLIAM L. HANLEY, JR., COMMONWEALTH OF PENNSYLVANIA. IN RE IRREVOCABLE INTER VIVOS TRUST AGREEMENT OF WILLIAM HANLEY, DECEASED. APPEAL OF DENNIS W. HILLIER, GUARDIAN AD LITEM FOR WILLIAM L. HANLEY, JR., ADMINISTRATORS OF ESTATE OF MARIE HANLEY, DECEASED, HEIRS OF ANNA BIRD, TULLAH I. HANLEY, HEIRS OF GLADYS H. LEAHY, EXECUTORS OF ESTATE OF JEAN F. DORN, COMMONWEALTH OF PENNSYLVANIA. WILBUR J. SIEBERT AND GUY MCKITTRICK, ADMINISTRATORS OF THE ESTATE OF MARIE HANLEY, DECEASED V. JAMES M. BIRD, LEE HANLEY, RICHARD G. LEAHY, SUBSTITUTE TRUSTEES UNDER DECLARATION OF TRUST FOR MARIE HANLEY, DECEASED, LEON J. LEAHY AND MANUFACTURERS AND TRADERS TRUST COMPANY, TRUSTEES UNDER WILL OF GLADYS H. LEAHY, TULLAH INNES HANLEY AND BENNETT FRIEDMAN, SURVIVING EXECUTORS OF THE ESTATE OF THOMAS EDWARD HANLEY, JAMES M. BIRD AND RUTH A. MCCREADY, EXECUTORS OF THE ESTATE OF J.W. BIRD, WILLIAM L. HANLEY, BARBARA L. REGAN, RICHARD LEAHY, WILLIAM H. BIRD, JOHN E. BIRD, JAMES M. BIRD, THOMAS E. BIRD, JOANNE BIRD DORN, JEAN FORSTER DORN, TULLAH INNES HANLEY, LEON J. LEAHY. APPEAL OF HEIRS OF GLADYS LEAHY, COMMONWEALTH OF PENNSYLVANIA. IN RE IRREVOCABLE INTER VIVOS TRUST AGREEMENT OF WILLIAM HANLEY, DECEASED. APPEAL OF HEIRS OF GLADYS LEAHY, HEIRS OF ANNA H. BIRD, DENNIS W. HILLIER, GUARDIAN AD LITEM FOR WILLIAM L. HANLEY, EXECUTOR OF ESTATE OF JEAN F. DORN, TULLAH HANLEY, ADMINISTRATORS OF ESTATE OF MARIE HANLEY, COMMONWEALTH OF PENNSYLVANIA. IN RE IRREVOCABLE INTER VIVOS TRUST AGREEMENT OF WILLIAM HANLEY, DECEASED. APPEAL OF ANNA H. BIRD, TO-WIT THE ESTATE OF WILLIAM BIRD, ESTATE OF JOANN B. DORN, JAMES BIRD AND THOMAS E. BIRD, ADMINISTRATORS OF THE ESTATE OF MARIE HANLEY, DENNIS HILLIER, GUARDIAN AD LITEM FOR WILLIAM L. HANLEY, JR., TULLAH HANLEY, COMMONWEALTH OF PENNSYLVANIA, HEIRS OF GLADYS LEAHY, EXECUTORS OF ESTATE OF JEAN F. DORN. WILBUR J. SIEBERT AND GUY MCKITTRICK, ADMINISTRATORS OF THE ESTATE OF MARIE HANLEY, DECEASED V. JAMES M. BIRD, LEE HANLEY, RICHARD G. LEAHY, SUBSTITUTE TRUSTEES UNDER DECLARATION OF TRUST FOR MARIE HANLEY, DECEASED, LEON J. LEAHY AND MANUFACTURERS AND TRADERS COMPANY, TRUSTEES UNDER WILL OF GLADYS H. LEAHY, TULLAH INNES HANLEY AND BENNETT FRIEDMAN, SURVIVING EXECUTORS OF THE ESTATE OF THOMAS EDWARD HANLEY, JAMES M. BIRD AND RUTH A. MCCREADY, EXECUTORS OF THE ESTATE OF J.W. BIRD, WILLIAM L. HANLEY, BARBARA L. REGAN, RICHARD LEAHY, WILLIAM H. BIRD, JOHN E. BIRD, JAMES M. BIRD, THOMAS E. BIRD, JOANNE BIRD DORN, JEAN FORSTER DORN, TULLAH INNES HANLEY, LEON J. LEAHY. APPEAL OF ANNA H. BIRD, TO-WIT THE ESTATE OF WILLIAM BIRD, THE ESTATE OF JOANN B. DORN, JOHN BIRD, JAMES BIRD AND THOMAS E. BIRD, COMMONWEALTH OF PENNSYLVANIA



No. 95 Pittsburgh, 1981, No. 96 Pittsburgh, 1981, No. 143 Pittsburgh, 1981, No. 144 Pittsburgh, 1981, No. 180 Pittsburgh, 1981, No. 181 Pittsburgh, 1981, No. 203 Pittsburgh, 1981, No. 204 Pittsburgh, 1981, Appeal from the Order of the Court of Common Pleas, Orphans' Court Division, of McKean County at Nos. 33 and 34 December Term, 1976

COUNSEL

John H. Yoder, Smethport, for Tullah Hanley et al.

G. Donald Gerlach, Pittsburgh, for Hillier et al. and William Hanley.

William C. Sennett, Erie, for Bird, participating party.

Howard D. Schwartz, Pittsburgh, for Dorn, participating party.

Beck, Johnson and Popovich, JJ. Johnson, J., files a dissenting statement.

Author: Popovich

[ 307 Pa. Super. Page 158]

This case involves appeals taken by: 1) Tullah Hanley; 2) the heirs of Anna H. Bird; 3) the heirs of Gladys Leahy; and 4) Dennis W. Hillier, Guardian Ad Litem for William L. Hanley, Jr., from the Order of the Court of Common Pleas of McKean County, Orphans' Court Division, denying their exceptions. We reverse in part and affirm in part.

The facts, which are not in dispute, are as follows: By 1932, William L. Hanley (hereinafter referred to as "Mr. Hanley"), age 88, had amassed a sizeable estate as a result of his business acumen. For example, Mr. Hanley founded and served as President of the Hanley Company and the Hanley Oil Company, the former of which he turned over active management to his son, William, in 1927. Thereafter, William served as President and Mr. Hanley retained the title of Treasurer. In addition, Mr. Hanley had large stock holdings in a number of companies, some of which included South Penn Oil Company (presently known as Pennzoil Company), National Fuel Gas Company and General Motors Company.

In 1927, in an attempt to divest himself of some of his assets, Mr. Hanley made gifts of 500 shares of Hanley Company stock to four of his children, Anna, Edward, William and Gladys. However, Mr. Hanley made no gift to, or for the benefit of, his fifth child, Marie.*fn1 At this point, it is to be noted that Marie was incompetent, although never legally declared as such. The Hanley family had a strong

[ 307 Pa. Super. Page 159]

Catholic faith and were concerned with taking care of their own members without undue publicity. Thus, formal guardianship proceedings were never instituted for Marie, either before or after Mr. Hanley's death, nor was Marie ever institutionalized. Additionally, there is evidence in the record to indicate that Marie was unable to speak from birth, but apparently she could communicate with her immediate family in a rudimentary fashion. She could perform simple tasks such as dressing and feeding herself, but could not perform other routine tasks required of an adult, nor could she manage her own financial affairs. Because of such deficiencies in Marie's makeup, she lived with her parents in Bradford, Pa., and had all of her needs cared for by them.

In late 1931 or early 1932, Mr. Hanley decided to make gifts to his five children. The testimony reveals that he talked to his eldest son, William, about the implementation of his desires. To determine the advisability of such giftgiving, Mr. Hanley directed his son to discuss the matter with a financial advisor employed by the Hanover Bank in New York City. Upon William's return, he informed his father that the financial consultant advised against making gifts or executing documents utilizing the term "trust," for it was anticipated that legislation might be forthcoming that would render the advisability of such action suspect.

Based on the advice proffered, Mr. Hanley, on April 25, 1932, gave to each of his four children (William L. Hanley, Jr., Anna H. Bird, T. Edward Hanley and Gladys Leahy) gifts of stock totaling approximately $48,000.00. As for Marie, he gave stocks of equal value to Anna H. Bird and T. Edward Hanley with instructions to use it to care for Marie. Mr. Hanley selected Anna and Edward to carry out this act since they were the only two children residing in Bradford. As far as the duties and obligations attendant to such appointment by their father was concerned, Anna and Edward had no written document evidencing the manner in which the fund was to be used for Marie's benefit. However, we note that each child received a stock certificate evidencing ownership of a fixed number of shares (500) in

[ 307 Pa. Super. Page 160]

Hanley Company. In Marie's case, we have two certificates that were issued. The first, Certificate No. 280, was made out to "ANNA H. BIRD & THOMAS E. HANLEY, TRUSTEES FOR MARY [sic] HANLEY." The Certificate was endorsed by the President ("William L. Hanley, Jr.") and Treasurer ("Wm Hanley" -- Mr. Hanley) of the company and dated April 25, 1932. Of significance here is the fact that the stub attached to the Certificate, which was also dated April 25th, was never issued and had written across its face the term "void". Also, on the bottom of the stub, there appears the language: "See certificate # 281". An examination of that document reveals that it was likewise dated April 25, 1932, and was issued in the names of "ANNA H. BIRD & THOMAS E. HANLEY" for five hundred shares of Hanley Company stock. The accompanying stub is dated April 28, 1932, and is marked "for Marie Hanley". This certificate is signed by "Wm Hanley" (Mr. Hanley) as Treasurer and "Gordon W. Reed" as Vice President.

Additionally, transfers of stock were made by Mr. Hanley to his children, which included Marie. For example, twenty-five shares of Hanley Oil Company capital stock, listed as $30,000 on Certificate No. 60, were issued on April 28, 1932, in the names of "THOMAS EDWARD HANLEY & ANNA H. BIRD". The Certificate was signed by Mr. Hanley as President and Thomas C. Francis as Assistant Treasurer. Interestingly enough, the transfer stub has written on it, after the typed language "Issued to," the legend "T.E. Hanley & Anna H. Bird for Marie Hanley". The stub was signed by Anna H. Bird. (Exhibit WH 22)

With respect to 200 shares of National Fuel Gas Company, the records of Manufacturers Hanover Trust Company, transfer agent for National Fuel, indicate that on April 29, 1932, Mr. Hanley transferred to each of his children 200 shares of said stock and, specifically, designated that the shares to be given to Marie were to be issued accordingly: "Anna H. Bird & Thomas E. Hanley, Trustees for Mary [sic] Hanley". (Exhibit WH 15) However, once again, the trust

[ 307 Pa. Super. Page 161]

    designation was revoked by Mr. Hanley. On July 19, 1932, the 200 shares were reassigned to "Anna H. Bird & Thomas E. Hanley as Joint Tenants with Right of Survivorship and not as Tenants in Common." Id. at 2.

In the month of June, 1932, General Motors and South Penn Oil Company (later Pennzoil) stock certificates were transferred by Mr. Hanley to his children, although on this occasion Marie was not included.

To regress somewhat, on April 29, 1932, four days after the transfer of twenty-five shares of Hanley Company stock "for Marie Hanley," Mr. Hanley executed his Will. In the first ITEM of said Will, Mr. Hanley set up a trust of one-third of his estate for his wife's life and upon her death the remaining portion of same, if any, was to fall into his residuary estate.

The second ITEM in Hanley's Will reads:

"If the provisions which I have heretofore made for my daughter, Marie Hanley, shall not, during any year after my death, produce an income of at least Eighteen Hundred Dollars ($1,800.00) then in such event or events I authorize and direct my Executors hereinafter named to pay to or on account of the support and maintenance of my said daughter such sum or sums as shall equal the difference between the income determined and the said sum of $1,800.00, provided, however, that such payment in the judgment of my said Executors shall be deemed necessary for her comfortable maintenance and support."

Mr. Hanley died testate on April 18, 1933, survived by his wife, Johanna, and five children, Marie Hanley, William L. Hanley, Jr., Thomas E. Hanley, Anna H. Bird and Gladys H. Leahy. As noted earlier in this Opinion, a sixth child, Lauretta H. Forster, predeceased Mr. Hanley and was survived by a daughter, Jean Forster Dorn. Johanna Hanley died a year after her husband's death. Marie Hanley passed away on July 3, 1974.

[ 307 Pa. Super. Page 162]

The probate of Marie's estate motivated the appellants*fn2 to file the instant appeal from the Orphans' Court's determination that the transfer of certain securities by Mr. Hanley to Anna H. Bird and Thomas E. Hanley constituted an outright "gift" to Marie, and, thus, distributable as part of her estate. The heirs of Anna H. Bird, also parties to the action below, took exception to the lower court's Order and filed a timely appeal from the denial thereof. However, the theory presented on behalf of these heirs was that the transfer of securities by Mr. Hanley to Anna H. Bird and Thomas E. Hanley in 1932, vested complete ownership and legal title in said stock in Anna and Thomas.*fn3

In responding to the claims made, we will first address the contention of the appellants -- Tullah Hanley, Dennis W. Hillier (guardian ad litem for William L. Hanley, Jr.) and the heirs of Gladys Leahy, followed by an ...


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