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In re Estate of McFadden

Superior Court of Pennsylvania

September 18, 2014

RE: IN THE MATTER OF ESTATE OF GEORGE MCFADDEN, DECEASED; APPEAL OF: RANDOLPH HARRISON, ROBERT C. HARRISON, CO-TRUSTEES AND BENEFICIARIES, AND RANDOLPH HARRISON, JR., BENEFICIARY OF THE TRUST UNDER WILL OF GEORGE MCFADDEN F/B/O THE DESCENDANTS OF EMILY B. STAEMPFLI

Argued, August 5, 2014

Appeal from the Decree of the Court of Common Pleas, Delaware County, Orphans' Court Division, No.: 0028-1931. Before CRONIN, J.

Roberta A. B. Barsotti, Philadelphia, for appellants.

BEFORE: FORD ELLIOTT, P.J.E., BENDER, P.J.E., BOWES, J., SHOGAN, J., ALLEN, J. OTT, J., WECHT, J., STABILE, J., and JENKINS, J. Ford Elliott, P.J.E., Bowes, J., Allen, J., Ott, J., and Stabile, J. join the opinion. Shogan, J. files a dissenting opinion in which Bender, P.J.E and Jenkins, J. join.

OPINION

Page 646

WECHT, J.

The above-captioned Appellants challenge the orphans' court's August 14, 2012 decree that the residuary trust (the " Trust" ) contained in the will (the " 1930 Will" ) of George McFadden (" Decedent" )[1] terminated on or about February 21, 2012, twenty-one years after the death of Decedent's last surviving child, Emily Staempfli. The orphans' court found that Ms. Staempfli was the measuring life for purposes of the Trust. We reverse.

The orphans' court has provided an admirably thorough, almost Genesis-like account of the genealogy of those among Decedent's progeny whose interests are implicated in one way or another by the interpretation of the Trust. See Orphans' Court Opinion (" O.C.O." ), 8/14/2012, at 8-11. As well, the orphans' court has provided a prodigious and detailed rendition of other trusts spawned by the Trust, the trustees associated with those trusts, and their respective positions and arguments relative to the Trust's termination. See id. at 4-7.

Appellants here raise only one overarching question, as to which there are only two possible answers: Whether the orphans' court erred in determining who among three candidates constituted or constitutes the measuring life for purposes of the termination and distribution of the Trust principal. In resolving this question, our discussion proceeds as follows: First, we review the rule against perpetuities. Thereafter, we scrutinize the Trust's perpetuities clause and specify the candidates for the measuring life, excluding the many descendants of Decedent mentioned by the orphans' court who are irrelevant to our examination. Finally, we consider Appellants' arguments,[2] and we decide this appeal.

Our Supreme Court has defined perpetuities as follows:

Perpetuities are grants of property, wherein the vesting of an estate or interest [is] unlawfully postponed; and they are called perpetuities not because the grant, as written, would actually make them perpetual, but because they transgress the limits which the law has set in restraint of grants that tend to a perpetual suspense of the title, or of its vesting.

In re Newlin's Estate, 367 Pa. 527, 80 A.2d 819, 822 (Pa. 1951). The applicable rule against perpetuities " prohibit[s] the creation

Page 647

of future interests or estates which . . . may not become vested within a life or lives in being at the death of the testator and twenty-one years thereafter." In re Lockhart's Estate, 306 Pa. 394, 159 A. 874, 876 (Pa. 1932).

More recently, this Court discussed the three-stage evolution of the rule, only the first two steps of which inform our analysis of the instant case:

The evolution of the rule against perpetuities in the area of class gifts has had three distinct developmental stages in Pennsylvania. The first stage began with the founding of Pennsylvania and lasted until 1929. During this period, Pennsylvania followed the early common[-]law rule against perpetuities[,] which then called for the remorseless application of the " possibilities test" to determine the validity of all future interests. Under this rubric, a future interest, such as a remainder in a trust to all great-grandchildren, was void if there was even the slightest possibility that it might vest beyond the permissible period of a life or lives in being plus twenty-one years.
The second stage of development was a transitional period which lasted from 1929 to 1947. During this time period, our Supreme Court attempted to eliminate some of the harsher results which occurred in the area of the class gifts under the common[-]law rule against perpetuities' " possibilities test" by adopting the doctrine of vertical separability. The doctrine of vertical separability held that valid remainders would be separated from void ones and given effect if it would not alter the overall testamentary scheme of distribution.

In re Estate of Weaver, 392 Pa.Super. 312, 572 A.2d 1249, 1253 (Pa. Super. 1990) (citations omitted).[3],[4] It is important to note these two distinct stages of trust interpretation and application because, as discussed below, our analysis requires us to compare Decedent's 1928 Will (the " 1928 Will" ) with the 1930 Will. Decedent must be presumed to have known of the harsh results that might follow from providing in trust for beneficiaries defined as a class under the law in 1928. Decedent must be presumed to have been equally aware that, in 1930, the separability test would protect against the risk that a substantial portion of the Trust would be voided simply because one or more members of a specified class might be ineligible to serve as lives in being or otherwise take under the Trust. See In re Mayer's Estate, 289 Pa. 407, 137 A. 627, 629 (Pa. 1927) (" Testator, more than any one, knew the condition of his estate, and he must be presumed to have known the law." ); City of Philadelphia v. Davis, 1 Whart. 490, 502 (Pa. 1836) ( " [T]he testator must be presumed to know how the law stood at the time of making his will . . . ." ).

Having set forth the legal background against which the current case must be resolved, we now review the sections of Decedent's 1930 Will that inform the question sub judice :

ARTICLE FOURTH: I give, devise and bequeath all the rest, residue and remainder of my estate, and I also give,

Page 648

devise and bequeath all estates or interests over which I have power of appointment . . . IN TRUST, for the following uses, to wit:
* * * *
(3) . . . IN TRUST, as to all the rest, residue and remainder of my estate, . . . to pay and distribute the net income thereof as follows: [describing the first-priority distribution schedule of Trust income for Decedent's wife]. And . . . during the lifetime of my wife, IN TRUST, to receive and apply the balance of the net income of my estate as follows: To pay monthly, as nearly as possible, in the proportion of two parts of the balance of the net income to each of my sons, and one part thereof to each of my daughters, living at the time of my death, or to the respective issue living at the time of my death of a deceased son or daughter, such issue being entitled to their parent's share of income, for and during the life of each of such children or issue of a deceased child living at the time of my death. . . .
Upon the death of each child of mine living at the time of my death, and upon the death of each of the issue living at the time of my death of a deceased child of mine, to pay the income of such child or issue of a deceased child, in the proportions above provided, meaning thereby that whenever a descendant of mine shall die leaving male and female children, the income shall be divided in such a way that the males shall receive twice as much income as the females, to and among the child or children of such child or issue of a deceased child, per stirpes and not per capita, for the period of twenty-one years after the death of the last survivor of the children and issue of deceased children of mine living at the time of my death.
* * * *
And IN TRUST, upon the expiration of the period of twenty-one years after the death of the last survivor of the children and issue of deceased children of mine living at my death, to pay over to my descendants, per stirpes, a proportion and division of the principle of my residuary estate equal to the proportion and division of income hereinbefore provided and directed for my children or issue of deceased children, namely, the proportion of two (2) shares for each male and one (1) share for each female.
It being my intention that the income from my residuary estate shall be paid in the proportions of two parts to my sons and their issue and descendants, and one part to my daughters and their issue and descendants, per stirpes; that the same plan shall be followed in the division of income among the male and female children of my children and their issue; and that the principle of my residuary estate shall be divided in the same proportions.

1930 Will at 2-7 (emphasis added to highlight language pertinent to our analysis).

The most critical provisions are those that address the rule against perpetuities. In relevant part, that language provides for the distribution of the Trust principal " upon the expiration of the period of twenty-one years after the death of the last survivor of the children and issue of deceased children of mine living at my death." Id. at 6. We join Appellants and the orphans' court in their assessment[5] of this language as ambiguous.

Page 649

Either of the following two interpretations of that language is reasonable: (1) That the life in being whose death would trigger the twenty-one year perpetuities count-down was that of whomever among Decedent's children, all of whom were alive at the time of his death, survived his or her siblings; or (2) That the life in being whose death would trigger that count-down was whichever one of Decedent's two grandchildren who were alive at his death survived the other. The first interpretation stems from the proposition that the issue of one of Decedent's children would become the measuring life only if the parent of the issue in question predeceased the Decedent. The second is based upon the contrary proposition that the issue of a child would become the measuring life simply for being alive at the time of Decedent's death, irrespective of whether that issue's parent (Decedent's child) was alive at the time of Decedent's death. The answer hinges on the meaning of the phrase " the last survivor of the children and issue of deceased children of mine living at my death."

The orphans' court chose the former interpretation, and consequently ruled that the Trust terminated on or about February 21, 2012, twenty-one years after the death of Emily Staempfli, the last of Decedent's children to die, with the principal subject to immediate distribution amongst surviving beneficiaries as specified by the 1930 Will. If the latter interpretation were the case, however, termination would occur twenty-one years after the death of the survivor of the two grandchildren (each the issue of one of Decedent's children) who were alive at Decedent's death. Both grandchildren in question were alive at the time of the orphans' court's ruling; if the survivor of those grandchildren is the measuring life, then the Trust would terminate at some time in the future, twenty-one years after the death of the survivor of those two grandchildren.[6]

The orphans' court's determination, and our review of it, are governed by the following standards:

In Houston Estate, 414 Pa. 579, 201 A.2d 592, 595 (Pa. 1964), the Court, quoting from prior decisions, said: * * * " It is now hornbook law (1) that the testator's intent is the polestar and must prevail; and (2) that his intent must be gathered from a consideration of (a) all the language ...

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