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In re Shoemaker

Superior Court of Pennsylvania

May 7, 2015


Page 348

Appeal from the Decree Entered March 25, 2014, In the Court of Common Pleas of Columbia County, Orphans Court, at No. 2012 OC 231.



Page 349


Appellant, Geisinger-Bloomsburg Hospital (" GBH" ), appeals from a decree entered on March 25, 2014, in the Orphans' Court division of the Columbia County Court of Common Pleas. On appeal, GBH challenges, inter alia, the Orphans' Court's creation of a Pour Over Endowment Trust and the requirement that charitable trust funds be spent only in years in which GBH has an operating surplus. For the reasons that follow, we affirm in part, and reverse in part, the decree entered on March 25, 2014.[1]

Page 350

This case concerns the allocation and distribution of funds from several charitable trusts to the hospital following its affiliation with Geisinger Health System Foundation (" GHSF" ). On November 15, 2012, First Columbia filed a petition pursuant to 20 Pa.C.S. § 7711 concerning the administration of eight trusts. First Columbia sought judicial interpretation of the effect that multiple corporate mergers and the changing corporate identity of the original intended trust recipient, The Bloomsburg Hospital, had on these eight trusts.[2] On January 18, 2013, GBH filed its response.

On March 15, 2013, the Attorney General of Pennsylvania, in its capacity as parens patriae, filed its statement of position in this matter.[3] The Attorney General concluded that despite the changes in corporate identity, the trusts at issue may still " be administered in exact conformity with the Settlors' intended schemes of distribution because [GBH] continues to operate as a non-profit hospital in Bloomsburg, Pennsylvania." Attorney General's Statement of Position, 3/15/13, at ¶ 9. The Attorney General was satisfied that no funds from the trusts had been, or would be, unlawfully diverted from GBH. Id. at ¶ 11. However, the Attorney General made the following recommendation:

The Commonwealth respectfully recommends language which affirms GHSF's commitment to honor the settlors['] intentions as follows, " [A]ny and all funds received from the charitable trusts created by John Paul Barger[,] Reuben H. Learn, Mary Elizabeth McNinch, Hazel W. Shoemaker, Grover C. Shoemaker, Mary F. Sneidman, H.W. Titman, Mary W. Wolfe, and any other present or future trust which references " Bloomsburg Hospital" shall be restricted exclusively to the Geisinger-Bloomsburg Hospital facility in Bloomsburg, Pennsylvania to be utilized in conformity with the terms of each granting instrument and shall not be diverted to any other use or facility without further Order of Court."

Id. at ¶ 12. Following hearings on December 27, 2013, and February 10, 2014, the Orphans' Court issued its findings of fact and conclusions of law. Due to the extensive nature of the court's findings, we shall not restate them here. However, a brief summary is in order.

On February 11, 1905, an entity known as " The Bloomsburg Hospital" was incorporated. The Orphans' Court took judicial notice of the fact that the hospital's stated purpose was caring for " the sick ... in the county of Columbia, especially in and about the Town of Bloomsburg." Findings of Fact, 3/25/14, at ¶ 7. The Bloomsburg Hospital later became known as Bloomsburg Hospital. Through a series of complicated transactions, Bloomsburg Hospital and related and ancillary corporate entities have been joined under the larger corporate umbrella of GHSF. GHSF is the controlling corporation of an integrated health care system with GBH, formerly known as Bloomsburg Hospital, operating as a hospital in Bloomsburg, Pennsylvania. Id. at ¶ ¶ 7-21; Conclusions of Law, 3/25/14, at 11. The trusts at issue all directed that certain funds from the individual trusts

Page 351

were for the benefit of Bloomsburg Hospital.

As stated by First Columbia, the question before the Orphans' Court was " the propriety of continued income distributions to GBH and the appropriateness of any conditions or restrictions applicable to future distributions should the court conclude that GBH continues to be qualified as a beneficiary of each Trust." First Columbia's Amicus Curiae Brief at 6-7. According to First Columbia, its concern was " whether the amended Articles [of Incorporation of GBH] permitted Trust funds to be diverted to other charitable entities under the control of GHSF that did not benefit the Bloomsburg Hospital and Bloomsburg area." Id.

The Orphans' Court found that " [t]he hospital in Bloomsburg remains in existence, both as a hospital located in Bloomsburg and as a separate legal entity, whether known as BH [Bloomsburg Hospital] or GBH." Findings of Fact, 3/25/14, at 20. However, the court then concluded, in relevant part,[4] as follows:

15. The charitable purpose of the settlors, specifically, to benefit the intended locale and population of the charity which is specified to be Columbia County, especially in and about Bloomsburg, will become unable to be assured under GBH's interpretation, and accounting restrictions are necessary to avoid an unlawful, impracticable and wasteful result.
16. The intent of all of the settlors of the Trusts at issue was to benefit BH [Bloomsburg Hospital], consistent with the object expressed in the original Charter to TBH [The Bloomsburg Hospital], being the population of Columbia County, especially in and about the Town of Bloomsburg. A further intent was to facilitate the availability of an acute care hospital, serving said population, providing all of the BH Services.
17. Achievement of the settlors' intents cannot be assured without accounting restrictions, given GBH's stated intent of distributing Trust income throughout the Geisinger system in the event of consolidated surpluses at GBH. Money is fungible. A dollar into a bank account is always a dollar in a bank account. GBH and GHSF cannot be permitted to regard the first $100,000 of operational expenses to be paid for by a hypothetical $100,000 of Trust income, and then pay the dollars which come from patient revenues to affiliate hospitals 100 miles away from Bloomsburg when there is an operational net profit, at least limited to the Trust income. Simply put: That is too easy.
18. Orphans' Courts are permitted to prescribe a tailored accounting to ensure compliance with a settlor's intent. []
19. Pursuant to 20 Pa.C.S. § 7711(c), a judicial proceeding involving a trust may relate to any matter involving the trust's administration, including a request for declaratory judgment. This particular section further provides this court with the authority to clarify and define the terms and conditions of administration of the Trusts through the Order and

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Decree which follows, for the same reasons articulated above.

Conclusions of Law, 3/25/14, at ¶ ¶ 15-19.

The Orphans' Court then applied the doctrine of cy pres [5] and issued the following order:

AND NOW, to-wit, on this 25th day of March, 2014, after hearing held on the Petitions (as defined at paragraph 4. of the Findings of Fact and Discussion), on the basis of the foregoing Finding[s] of Fact, Conclusions of Law ...

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