In Re: Jackson, J. Appeal of: Townsend, P., 61 WDA 2017

Background

John E. and Sue M. Jackson created a charitable trust in 1950; Trust language gives trustees broad discretion to distribute income and principal to public charities and states "no limitation" on amounts distributed.
Trust originally named one individual trustee (W.R. Jackson) and a corporate trustee; after amendments the composition became one corporate trustee (50% vote) and two Jackson-family individual trustees (each 25%).
Disputes arose between the corporate trustee (PNC, successor to National City) and the individual trustees (Townsend and William R. Jackson, Jr.) over 2016 distributions: amounts and recipient charities.
PNC filed a petition under 20 Pa.C.S. § 7763(a.1) to resolve a trustees' deadlock and asked the court to (a) limit 2016 distributions to the minimum (to avoid IRS § 4942 penalties) and (b) select donees from PNC’s proposed list because time was short.
The Orphans’ Court ordered distributions limited to 5% of trust assets for 2016 and adopted PNC’s list of donees; individual trustees appealed, arguing lack of hearing, failure to determine settlors’ intent, usurpation of trustee discretion, and improper reliance on PNC’s deadline.
The Superior Court affirmed the 5% distribution limit as a prudent, temporary measure to avoid tax penalty but vacated the selection of PNC’s donees and remanded for evidentiary proceedings to determine settlors’ intent and permit expedited discovery.

Issues

Issue	Townsend (Plaintiffs) Argument	PNC (Defendant) Argument	Held
Standing to appeal	Individual trustees are aggrieved parties with direct interest and may appeal the Orphans’ Court order	PNC argued trustees lacked substantial, direct, immediate interest	Held: Individual trustees have standing to appeal as aggrieved parties and fiduciaries representing unascertained charitable beneficiaries.
Authority to invoke § 7763(a.1) / deadlock	Orphans’ Court improperly accepted a contrived deadlock and usurped trustee discretion without hearing	PNC: deadlock existed; court may resolve under § 7763(a.1) including directing distributions to protect trust	Held: Petition under § 7763(a.1) was proper; court may resolve deadlocks, but must exercise independent judgment and may require evidentiary hearing.
Limiting 2016 distributions to 5%	Trust expressly allows ‘‘no limitation’’ on distributions; court exceeded trustee authority by imposing a cap	PNC: 5% aligns with historical practice and avoids IRS § 4942 excise taxes; court may limit to avoid harm	Held: Affirmed in part — the court did not abuse discretion in ordering the 5% distribution for 2016 to avoid tax penalty given time pressure, but future limits require factual inquiry.
Selection of charitable donees / process	Court denied due process by deciding donees without an evidentiary hearing; should follow settlors’ intent and trust history; deference to family trustees	PNC: its proposed donees reflect settlors’ historical giving patterns and are appropriate; time constraints required choosing between submitted lists	Held: Vacated the appointment of PNC’s slate — court abused discretion by choosing a slate without evidentiary findings; remand for hearing to determine settlors’ intent and criteria for beneficiaries; expedited discovery ordered.

Key Cases Cited

In re Paxson Tr. I, 893 A.2d 99 (Pa. Super. 2006) (standards of review and deference to orphans’ court findings)
Obici Tr., 134 A.2d 900 (Pa. 1957) (court may break trustee deadlock to effectuate settlor’s intent)
Stuart v. Continental Illinois Nat’l Bank & Trust Co. of Chicago, 369 N.E.2d 1262 (Ill. 1977) (when trustee deadlock occurs, trial court must resolve by appointment or plan consistent with settlor’s charitable intent)
In re McCune, 705 A.2d 861 (Pa. Super. 1997) (standing principles for appellate review contrasted)
In re Trust Under Agreement of Taylor, 164 A.3d 1147 (Pa. 2017) (discussion of Pennsylvania’s adoption and interpretation of the Uniform Trust Act)