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In re Rosemary C. Ford Inter Vivos Qtip Trust

Superior Court of Pennsylvania

December 18, 2017

IN RE: ROSEMARY C. FORD INTER VIVOS QTIP TRUST APPEAL OF: ROSEMARY C. FORD

         Appeal from the Order August 25, 2016 In the Court of Common Pleas of Montgomery County Orphans' Court at No(s): 2014-X2918

          BEFORE: LAZARUS, J., SOLANO, J., and STEVENS, P.J.E. [*]

          OPINION

          SOLANO, J.

         Appellant Rosemary C. Ford appeals from the en banc order of the Orphans' Court Division of the Court of Common Pleas of Montgomery County that dismissed for lack of standing her exceptions to the order entered by the orphans' court on April 7, 2016. That order confirmed the account dated November 3, 2015, of the Rosemary C. Ford Inter Vivos QTIP Trust, as prepared by her former husband, Appellee George Ford, as trustee.[1] We affirm the orphans' court's holding that Rosemary does not have standing to require George, as trustee, to make the Trust's property productive.

         On January 18, 2007, during the parties' marriage, Rosemary created the Rosemary C. Ford Inter Vivos QTIP Trust[2] ("the Trust") through a Trust Agreement that named George as trustee. See Trust Agreement, 1/18/07, at 1. The Trust holds two commercial properties located on East Mermaid Lane in Wyndmoor, Montgomery County ("the East Mermaid Properties"), which are leased to a family business, George Ford & Sons, Inc., and operated by George's son, Tom Ford. Id. at 20, Schedule "A." According to the Pennsylvania Department of State's Corporations Bureau, George Ford & Sons, Inc. is an active and operating business. The main dispute in this case concerns production of income (rent) from these properties.

         In Paragraph III, the Trust Agreement makes George the Trust's primary beneficiary, but it contains provisions making Rosemary a contingent beneficiary. Paragraph III states, in relevant part:

(A) During the lifetime of [George]:
(1) Trustees shall pay over the net income, if any, to [George], in quarterly or more frequent periodic installments. . . .
(3) [George] may at any time by written notice, require [the] Trustees either to make any non-productive property of this trust productive or to convert such non-productive property to productive property within a reasonable time.
(B) Upon the death of [George], survived by [Rosemary], then the remaining trust assets shall constitute a separate trust for the benefit of [Rosemary], to be administered as follows: . . .
(1) Trustees shall pay over the net income, if any, to [Rosemary], in quarterly or more frequent periodic installments. . . .
(3) [Rosemary] may at any time by written notice, require [the] Trustees either to make any non-productive property of this trust productive or to convert such non-productive property to productive property within a reasonable time.

Id. at 1 ¶ III(A)(1), (3) & (B)(1), (3). The Trust is irrevocable. Id. at 13 ¶ X. It contains a Spendthrift Provision that prevents a creditor of an individual beneficiary from accessing the income and principal of the Trust. Id. at 4 ¶ V.[3]

         On January 22, 2009, Rosemary filed a divorce action against George. Orphans' Ct. Op., 4/7/16, at 2.[4] On April 2, 2009, she filed a separate action for support.[5]

         On June 5, 2009, Rosemary and George entered into an Agreement in Principle for a "temporary resolution" of the support action. The Agreement provided in Paragraph 2 that "[George] shall pay to [Rosemary] one-half of the net rental income from the [East Mermaid Properties] less [George]'s mortgage payment on the marital residence, which will come off the top.'" Agreement in Principle ¶ 2. The Agreement further provided that the parties would use Michael Fingerman as an arbitrator "for any issues that they cannot resolve, including but not limited to the amount of support that should be paid." Id. ¶ 6. On June 9, 2009, the trial court entered an order making the Agreement in Principle an order of the court.

         On October 4, 2010, the parties resolved their divorce action by an arbitration conducted by Mr. Fingerman. In a lengthy document called "Arbitration Conclusions/Award, " Mr. Fingerman summarized various matters relating to the parties and then set forth an award relating to division of the parties' property, alimony, and counsel fees. His arbitration award was then incorporated into the parties' divorce decree dated January 21, 2011. Orphans' Ct. Op., 4/7/16, at 2.

         The arbitration document made reference to the parties' equal division of net income from the East Mermaid Properties under the Agreement in Principle in the support action, and it said that the parties had agreed to arbitrate "all issues relating to the dissolution of the parties' marriage." Arb. Concl./Award at 1-2 (Concl. § I.C.2., D.1). In a summary of the parties' "Net Marital Assets, " Mr. Fingerman noted that the East Mermaid Properties were listed as having a fair market value for insurance purposes of more than $2 million and that net income was being used to pay off a home equity line of credit on the marital residence, with the balance being divided between the parties pursuant to the Agreement in Principle. He also noted that rent due under a consumer price index inflator clause in the Properties' lease had not yet been paid. Id. at 6-7 (Concl. § II.A.4.).

         In the section of the arbitration document titled "Award, " Mr. Fingerman first included a section titled "Property Division" in which he said that "the net marital assets shall be divided between the parties as follows." He then listed various assets, including the following entry:

Asset/Liability

Husband

Wife

Real Estate . . .

East Mermaid Lane (income/in-kind)

----

----

         Arb. Concl./Award at 18 (Award § 1.A.). Under a section called "Effectuation, " he said that "the foregoing distribution shall be effectuated as follows" and included this paragraph regarding the East Mermaid Properties:

East Mermaid Lane/QTIP Trust/Rent: [George] shall continue to pay [Rosemary] one-half (1/2) of all rental income received on account of [the] East Mermaid [Properties], provided, however, that commencing with the first monthly rental payment received following the date of this Award, [George] shall no longer deduct any amounts paid by him on account of the home equity line of credit on [the parties' former marital residence]. In the event [George] pre-deceases [Rosemary], all such rental income shall be paid to [Rosemary] pursuant to the QTIP Trust, and in the event [Rosemary] pre-deceases [George], all such rental income shall be paid to [George] pursuant to the QTIP Trust. Promptly following the date of this Award, [George] shall obtain any retroactive rental due on account of the Consumer Price Index (CPI) adjustment set forth in the lease on East Mermaid Lane, and any such retroactive income shall be divided equally between the parties. All future rent, including appropriate CPI adjustments, shall be divided equally between both parties until either party's death as set forth above.

Id. at 21 (Award, § I(B)(1)(d)). There was no section of the Award addressing support. The section of the Award dealing with "Alimony" stated:

In consideration of all factors including, without limitation, the equal division of net income received from East Mermaid Lane, the potential rent available to [Rosemary] from [other properties], and [George]'s earned income, perquisites and excess social security income, commencing on the first (1st) day of the month following the date of this Award, and on the first (1st) day of each month thereafter, [George] shall pay to [Rosemary], as alimony, the sum of $1, 750 per month ("Alimony Amount"). . . . [George]'s obligation for payment of the Alimony Amount shall cease upon the first to occur of (1) [Rosemary]'s death; (2) [George]'s death; (3) [Rosemary]'s remarriage; (4) [Rosemary]'s cohabitation as then ...

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