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December 4, 1997


Appeal from the Order in the Court of Common Pleas of Allegheny County, Orphans Court Division, No. 4788 OF 1979. Before KELLY, J.

Before: Tamilia, J., Popovich, J., and Hester, J. Opinion BY Tamilia, J.

The opinion of the court was delivered by: Tamilia


Filed December 4, 1997

The Distribution Committee of the McCune Foundation appeals from the lower court's Order dated October 9, 1996, whereby the court denied the Committee's motion to remove a non-suit. On appeal, the Committee presents the following reasons the trial court erred in denying its motion to remove the non-suit. First, the Distribution Committee contends that it has standing both to open the trustee's first and partial account and to maintain this appeal. According to the Committee, the lower court improperly denied it standing to review the first account; and as a result, the court failed to consider evidence of transactions in the first account as substantive evidence of the trustee's breaches of fiduciary duty. Second, the Committee argues it presented sufficient evidence of conduct after the first account to withstand a motion for non-suit. It claims the lower court applied the wrong standard of review and maintains that the trustee's acquisitions and retention of its corporate parents' securities constituted sufficient evidence of self-dealing and/or imprudent jeopardizing investments, prohibited by the trust document, Pennsylvania law and/or the Internal Revenue Code. In their most basic form, the Committee's arguments are (1) the Committee has standing to bring this action and (2) the Foundation's corporate trustee breached its duties of loyalty and care by selfdealing and failing to diversify the Foundation's stock holdings.

The McCune Foundation was established under the will, as amended by codicil, dated April 22, 1974, of Charles L. McCune. Article 6, Section 1, of the will empowered the Distribution Committee to direct distributions of the Foundation funds. Under Article 7, the Union National Bank of Pittsburgh (UNBP) was appointed corporate trustee with authority to manage the Foundation's investments. In the codicil, UNBP was directed to vote the Foundation's UNBP stock according to the written directions of the Committee. Subsequently, the Foundation was funded with over one million shares of Union National Corporation (UNC) stock. Although UNBP was named as corporate trustee, it merged into UNC on February 8, 1982. Thereafter, on January 26, 1989, UNC merged with Pennbancorp to form Integra Financial Corporation (IFC).

On September 17, 1991, the Committee initiated litigation by filing a Petition for Citation for Rule to Show Cause, seeking the appointment of two of its members as co-trustees of the Foundation. On May 4, 1992, the Committee filed a second petition seeking to remove the corporate trustee. Subsequently, the Court of Common Pleas denied cross-motions for summary judgment, and on April 13, 1994, the Committee filed a third "consolidated, amended and restated" petition seeking 1) to open the trustee's first and partial account, 2) to surcharge and remove the trustee, 3) to join Robert Patton as a partydefendant, 4) to impound the fees of the trustee and its counsel and 5) to obtain reimbursement of the Committee's attorney fees. By Memorandum Opinion dated December 15, 1994, the Court of Common Pleas held that the Committee lacked standing to seek review of the first account under 20 Pa.C.S. § 3521, Rehearing; relief granted.

On April 17, 1996, the trial court commenced an evidentiary hearing on the Committee's third petition. It granted the trustee's motion in limine restricting testimony to transactions after the trustee's first and partial account. On May 1, 1996, the court granted the Attorney General's motion for a compulsory nonsuit. On October 9, 1996, the Committee's motion to remove nonsuit was denied by the Court en banc. On November 6, 1996, the Committee filed notice of appeal.

The first issue presented is the Committee's standing, both to contest the trustee's first account and to bring this appeal. With regard to the Committee's challenge of the trustee's first and partial account, the Probate, Estates and Fiduciaries Code, § 3521 (supra) , provides: "If any party in interest shall, within five years after the final confirmation of any account of a personal representative, file a petition to review any part of the account ... the court shall give such relief as equity and Justice shall require." (emphasis added.) This provision is made applicable to trusts by virtue of 20 Pa.C.S. § 7183, Notice, audits, reviews, and distribution. While Section 3521 states that "any party in interest" may challenge a personal representative's account, appellant acknowledges that, "No case sets forth a specific requirement for standing under 20 Pa.C.S. § 3521 other than that otherwise necessary to be a party in a proceeding." (Appellant's brief, p. 24.) Moreover, courts interpreting standing under Section 3521 have incorporated the same concepts, which underlie standing as a general notion. See In re Trust Under Agreement of Keiser , 392 Pa. Super. 146, 572 A.2d 734, 736 (1990).

With regard to the right of appeal, Rule 501 of the Pennsylvania Rules of Appellate Procedure states, "except where the right of appeal is enlarged by statute, any party who is aggrieved by an appealable order ... may appeal therefrom." Pa.R.A.P. 501, Any Aggrieved Party May Appeal. (emphasis added.) An aggrieved party must have a substantial interest at stake. In re Francis Edward McGillick Found. , 537 Pa. 194, 642 A.2d 467, 469 (1994). "A 'substantial' interest is an interest in the outcome of the litigation which surpasses the common interest of all citizens in procuring obedience to the law." In re Barnes Found. , 443 Pa. Super. 369, 661 A.2d 889, 894 (1995) (citations omitted). In addition, the party's interest must be adversely affected in a manner, which is both direct and immediate. Keiser , supra .

A 'direct' interest requires a showing that the matter complained of caused harm to the party's interest. An 'immediate' interest involves the nature of the causal connection between the action complained of and the injury to the party challenging it, and is shown where the interest the party seeks to protect is within the zone of interests sought to be protected by the statute or constitutional guarantee in question.

Barnes , supra at , 661 A.2d at 894 (citations omitted).

In this case, it is undisputed that the Committee does not possess a beneficial interest in the Foundation. The Committee, therefore, has no stake in the funds distributed by the Foundation and cannot be directly aggrieved by the trustee's actions. Keiser , supra . Although standing does not require the presence of a direct economic interest, it does mandate that a party possess some sort of substantial interest, which has been adversely affected by the alleged misconduct. McGillick , supra . In the absence of a beneficial interest, the Committee must demonstrate the existence of some other interest, which would justify its standing to pursue this matter.

The Committee argues that it possesses a fiduciary interest on behalf of the Foundation's beneficiaries. "The beneficiary of charitable trusts is the general public to whom the social and economic advantages of the trusts accrue." Pruner Estate , 390 Pa. 529, 136 A.2d 107, 109 (1957). Under these circumstances, however, the general public is properly represented by the attorney general, not the Committee. See Valley Forge Historical Soc'y v. Washington Mem'l Chapel , 493 Pa. 491, 426 A.2d 1123 (1981); Wiegand v. Barnes Found. , 374 Pa. 149, 97 A.2d 81 (1953). Although the attorney general does not have exclusive standing with regard to the enforcement of charitable trusts, a private party seeking to enforce a charitable trust must possess an interest in the litigation, which surpasses the common interest of the public in continuing to benefit from the trust. Wiegand ; Barnes , supra . Acting as purely the representative of the public, the Committee cannot ...

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