Case Information
*1 J-A03018-17
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 IN RE: ESTATE OF: JOSEPH L. GRAHEK, IN THE SUPERIOR COURT OF DECEASED PENNSYLVANIA APPEAL OF: DAVID J. GRAHEK, PHILIP L.
GRAHEK, KATHLEEN G. CONNAL, JAMES
V.A. GRAHEK, STEVEN P. GRAHEK
No. 554 MDA 2016 Appeal from the Order Entered March 11, 2016 In the Court of Common Pleas of Lancaster County Orphans' Court at No: 36-1976-1376 BEFORE: LAZARUS, STABILE, and DUBOW, JJ.
MEMORANDUM BY STABILE, J.: FILED APRIL 27, 2017
Appellants, David J. Grahek, Philip L. Grahek, Kathleen G. Connal, James V.A. Grahek, and Steven P. Grahek, appeal from the March 11, 2016 order adjudicating the account [1] of Wells Fargo Bank, N.A. (the “Trustee”). We affirm.
This matter concerns a trust (the “Trust”) [2] created under the October 1, 1971 will of Joseph L. Grahek, deceased. The Trust’s asset was income- ____________________________________________
[1] See Pa. O.C. Rule 2.9. There are two trusts at issue in this litigation. The parties reference them
as Trust A and Trust B. For purposes of this memorandum, we shall refer to both as the Trust.
(Footnote Continued Next Page)
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producing property (the “Property”) located in Orange County, California. [3] Marion Grahek (“Mrs. Grahek”), the decedent’s wife was the Trust’s income beneficiary during her lifetime. Appellants David J. Grahek and Philip L. Grahek were remainder beneficiaries. [4] The Trust produced $200,000 to $300,000 per year in income for Mrs. Grahek.
On August 28, 2006, the Trust sold the Property because it was under threat of eminent domain from the Orange County School District. The Trustee planned to reinvest the sale proceeds—$8.7 million [5] —in like-kind property in order to avoid the capital gains tax. Section 1033 of the Internal Revenue Code permits conversion of property without recognition of a capital gain if the property in question is under threat of eminent domain. 26 U.S.C.A. § 1033. In this case, a qualifying 1033 exchange needed to occur before the end of 2009.
(Footnote Continued) _______________________
[3] We culled our summary of facts from the orphans’ court’s March 11, 2016 memorandum.
[4] Mrs. Grahek died on October 16, 2013. Appellants Kathleen G. Connal, James V. A. Grahek and Steven P. Grahek did not participate in this litigation and were never listed in the caption until the notice of appeal. Opinion Sur Appeal, 6/2/2016, at 1 n.2. The orphans’ court questioned the standing of these parties. Id. Neither side briefed the issue, and we have no need to address it. The net gain on the sale was $8.2 million.
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The Trustee invested roughly $2.1 million of the sale proceeds in money market accounts. That amount would eventually cover the down payment on a replacement property or the capital gains tax. The Trustee intended to obtain nonrecourse financing for the remainder of the purchase price of a replacement property. The Trustee planned to find a replacement property that would produce sufficient income to cover the mortgage. The Trustee invested the remainder of the Property sale proceeds, roughly $6.5 million, in a stock portfolio. The Trustee believed its strategy would continue to produce income for Mrs. Grahek and increase the principal value for the remainder beneficiaries. Appellants agreed with the Trustee’s plan.
During the financial crisis of 2008, nonrecourse financing became temporarily unavailable and the Trust’s investment portfolio lost some of its value. Dissatisfied with the situation, Appellants David J. Grahek and Philip L. Grahek petitioned to remove Wells Fargo as trustee. By agreement, David and Philip Grahek accepted appointments as trustees pro tem . In 2009, under their direction, the Trust purchased properties in Chattanooga Tennessee and Canton, Georgia. The Trust did not have to pay a capital gains tax.
On October 29, 2010, Appellants filed a petition to compel the filing of an account. [6] The Trustee filed its first account on January 14, 2011. ____________________________________________ See 20 Pa.C.S.A. § 7797.
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Appellants filed objections to the account on March 1, 2011. The Trustee filed a motion for judgment on the pleadings on June 1, 2011. The orphans’ court denied that motion on January 23, 2012. The parties filed a joint stipulation of facts on March 26, 2015. Appellants filed amended objections two days later. The orphans’ court conducted four days of hearings, the last of which occurred on April 10, 2015. The orphans’ court entered the order on appeal on March 11, 2016. Appellants filed this timely appeal on April 8, 2016.
Appellants state the questions involved as follows: 1. Did the orphans’ court err as a matter of law in concluding that the five-year investment horizon pursued by [the Trustee] satisfied the requirements of the prudent investor rule when [the Trustee] acknowledged that the maximum investment horizon was only three years and four months, and [the Trustee] was notified six months before the market crashed that 100% of the assets would be needed to complete the 1033 exchange?
2. Did the orphans’ court err as a matter of law in approving [the Trustee’s] compensation in light of its breach of fiduciary duty?
Appellants’ Brief at 4. [7]
____________________________________________ The orphans’ court, in its June 2, 2016 opinion sur appeal, notes that
Appellants’ questions presented differ in certain details from the issues they raised in their objections to the account. Likewise, Appellee asserts that Appellants have waived their arguments on appeal because they never raised them at trial (a violation of Pa.R.A.P. 302(a)), or because they are not included in Appellants’ concise statement of errors (resulting in waiver under Pa.R.A.P. (b)(4)(vii)). As set forth in the main text, we conclude that the trial court’s March 11, 2016 opinion provides a sufficient basis for this (Footnote Continued Next Page)
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The following standard governs our review: When reviewing a decree entered by the Orphans’ Court, this Court must determine whether the record is free from legal error and the court’s factual findings are supported by the evidence. Because the Orphans’ Court sits as the fact-finder, it determines the credibility of the witnesses and, on review, we will not reverse its credibility determinations absent an abuse of that discretion. However, we are not constrained to give the same deference to any resulting legal conclusions. Where the rules of law on which the court relied are palpably wrong or clearly inapplicable, we will reverse the court’s decree.
In re Estate of Fuller , 87 A.3d 330, 333 (Pa. Super. 2014). Further, we are cognizant that “one who seeks to surcharge a trustee bears the burden of proving that the trustee breached an applicable fiduciary duty.” In re Dentler Family Trust , 873 A.2d 738, 745 (Pa. Super. 2005), appeal denied , 897 A.2d 1184 (Pa. 2006).
Instantly, the orphans’ court found no breach of fiduciary duty. Rather, the orphans’ court found that the Trustee met its legal obligations; that the Trustee’s plan sufficiently provided for the interests of the income and remainder beneficiaries; and that a financial crisis of historic proportions was unforeseeable. Having reviewed the record, the parties’ briefs, the applicable law, and the orphans’ court’s opinion, we adopt the orphans’ court’s March 11, 2016 opinion as our own. The orphans’ court’s thoroughly (Footnote Continued) _______________________
Court’s review and an accurate analysis of the substance of Appellants’ objections to the account and arguments on appeal. To the extent Appellants intended to raise any issues not addressed in the trial court’s March 11, 2016 opinion and/or not previously preserved in accordance with the Rules of Appellate Procedure, we deem such issues waived.
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and accurately explains the lack of merit in each of Appellants’ objections to the Trustee’s account. We direct that a copy of the orphans’ court’s opinion be filed along with this memorandum.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 4/27/2017
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Circulated 04/03/2017 03:19 PM IN THE COURT OF COMMON PLEAS OF LANCASTER COUNTY, PENNSYLVANIA
ORPHANS' COURT DIVISION IN THE ESTATE OF: No. 3.6-1976~1376
JOSEPHL. GRAHEK deceased
OPINION.ON OBJECTIONS TO ACCOUNT FORMARIT:AL TRUS-T FOR.THE BENEFIT OF MAR.IONS. GRAHEI<>ATKINS'ON AND TRUST :FOR· TBE BENEFIT OF MARION s~ GRAHEK-ATKIIS'SON PROCEDURAL HISTORY
Currently pending before the Court are the.Arnended.Objections of Marion S. Grahek- Atkinson, David J. Grahek Philip L Otahek filed oh March 27, 2015 (hereinafter "Objections to Trust A").to First Account ofWellsFargo,N,A. pertaining Trust under Will of Joseph r, Grahek dated October 1, l97l, Marital Tru$tforthe Benefit of'Maricn.S. Grahek-Atkinson (hereinafter "TrustA") and to the. Petition forAdjudication Related thereto.
Also pending are Amended Objections of'Marion S. Grahek-Atkinson, David J. Grahek and Philip L. Grahek filed on March 27, 201 S'(ltereinafter "Objections to Trust B") to First Account Wells Fargo, N.A. pertaining to the Trust under Will of Josepht. Grahek, Deceased, dated October 1,. 1971, Trust for the. Benefit of MarionS.: Grahek-Atkinson (hereinafter "Trust B") and to the Petition for Adjudication Related thereto.
Wells Fargo.Bank(hereinafter "Trustee") served as Trustee of two trusts established by Joseph L. Grahek'. Initially; the asset of these trusts was a property located at 155 East La Jolla Street, Orange County, California (hereinafter "Placentia Property"). The Placentia Property was sold on or before August 28, 2006, after notice was provided that the property was under threat These trusts are referred to as Trust A and Trust B throughout the Pleadings and supporting documents as well as during the hearings on the Objections.
of condemnation. As a direct.result of circumstances surrounding the sale of the property, Trustee allegedly attempted to execute an "exchange" of the property-through the purchase of a subsequent property in accordance with Section I 033 of the Internal Revenue Code (hereinafter "1033.·~xchange'l
On February 13, 2009, Kathleen G. Connal, David J, Grahek, James YA. Grahek, Philip L Grahek and Steven P. Grahek (hereinafter collectively "Remainder Beneficiaries") _and Marion S. Grahek Atkinsonthereinafte» ''LifeTenaht")..tHed a Petitlon for Removal and Replacement of Trustee orAppointmeht of a.Substituted Fi'duci'aty Pro rem (herefnafter "Pro Tem .Petition").
Remainder Beneficiaries and Life Tenant contended that Trustee was failing to find -appropriate properties-to-complete the 1033.E.xchange. While thelitigation surrounding Pro Tem F~tidon · progressed, the g~adHn,~ f9l' 9ompleting the ims: Exchange grew closer, All par.ties appeared concerned that a resolution to their differences would not be reached in time to.effectuate the l 03'3 Exchange.
In art attempt .cornplete the 1 ()~3 Bxchange, the parties entered into a Stipulation and Release Agreement whereby Trustee agreed to the· appointment of'two of the Remainder Beneficiaries, David J. Grahek and. Philip L. Grahek as trustees pro rem, See Grahek Stipulation and Release Agreement filed March 25, 2009 and attached to the Court Order of March 27, 2009. TheAgreement also states that:
In consideration the Agreement, Beneficiaries, for themselves and their respective heirs; guardians, executors, administrators, predecessors, successors, parents, subsidiaries or affiliated corporations; companies divisions or entities; partners, directors, officers, managers, supervisors or employees; insurers; stockholders; personal representatives, attorneys, agents or assigns, and any one claiming through or under them or any of them (all foregoing persons and entities referred to collectively as the "Releasers"), fully remise, release and fully *9 discharge Wachovia, its respective heirs, guardians, executors, administrators, predecessors; successors, parents, subsldiaries or affiliated corporations, companies, divisions or entities, partners, directors, officets.managers, supervisors or employees, insurers, stockholders-personal representatives, attorneys, agents or assigns, and any one claimirt~ through pr under itot any of them (collectively "Wachovia") from all debts, obligations; demands.judgments, claims, controversies or causes of action of any kind whatsoever either in law or on equity, whether foreseen or unforseen, matured or unmatured, known or unknown, accrued or notaccrued, expensesj.interest, attorneys' fees, which Releasers, or any of them, ever had, now have, orheteinaftetca~. shafLofm4y have against Wachovia arising out of or in any waytefoted to the 1033 Exchange involving the Placentia Property except to the exte~toflos-s ·<it fi'abilhy sdleiy as a resultotany of Wachovia's warranties set forth in Paragraph 7· being tinttue, jnaccurate or erroneous in any material respect. R~leascirs-¢xptessly ·a~¢~ that except as set·fortb irrthe proceeding sentence, Wa.choiva:shali'.have no iiabHity· whatsoever ·arising out of or in any way related tothe 1033 farnhang~ inyoiving; the l>I~centia Prop.erty, incluciing. by not.limited to.taxes, ptnah;ies ipte.rest (including capital gains tax) thatmay be due orbecome due'to any taxin.g authority, incJudirtg but not limited to the Internal Revenue S~rvi~~ or.any state, local or municipal taxing authority. This paragtaphdoes not release:apyclaim Beneficiaries have asserted or may assert with respect to-lheadminietration ofthe Grahek Trusts; including but not limited to investment.of'the Trusrassets :ttpto the Effective Date.
Id. at ~8. Along with agreeing that David J. Grahek and Philip L. Grahek could serve a'strJ.1stees pro tem, the parties agreed that"[ d]uring the Pro, Tern Trustee Period. assets ofthe GrahekTrusts maintained by Wachovia [now Wells Fargo] shall be maintained only pursuant to the Administrative Agency Agreement, which is attached hereto as Exhibit"C" ... .'' Id. at 16. On March 27, 2009, this Court entered an Order appointing David J. Grahek arid Philip L Grahek as trustees pro tern (hereinafter "Trustees Pro Tem"), in accordance With the Agreement entered into all parties.
On October 29, 2010, Trustees Pro Tem and the Life Tenant (hereinafter collectively "Objectants") filed a Petition to Compel Filing an Account By Trustee. On January 14, 2011, Trustee filed their First Account for their period of administration of the two trusts. On *10 March J, 2011, Objectants filed their initial objections.
On Ju11,e l, iot L Trustee filed .1.M9ti9rrfot)\t~gt11ent QP thePJeagii.igS,.or in the Alternative, forPartial Summary Judgment, 'Jhi~ Ni!o~ion;;i)rpart, ~roµgh,tto iS$'1efhe scopeof" the release language of'paragraph-Sl.repredueed above, On.January 23,;20lZthe Co1.1rtI~sue4 an Opinion.and accompanying Ordefdenyihg.theMoiion for Judgment on thed>leadittgs: Thts 'opinion proV1ded .theJ)attkswfth.the Cout'Ps iriterpretatfon.ofthe.iartgUageof"'paragraph 8. and' how it limited liability of'Trustee:
On March 26,:2QJS, a Je>in(SUpuJ4tion.ofF~qfay,;~~ filed ~Y th~ pa.rtie$. Anwn~eq Objections were filed on March 27, 2015 as-referenced .above. fiearingswere held on:tvlarch:·~9, 2015, April 1, 2015, April. 9·, 2015 and :April 10, 2015. The parties have submitted briefs and reply briefs supporting theirrespective:posltions· end.the.mater 1s MW ffpefor disposition.
FINDINGS OF.FACT
Joseph L. Grahek (herefoafter "D:ec<!4.e».etdied on October 14, 1916 ha,ving disposed .ot his Estate byWil], See Joi11tStipulaU011 of.Ea:91$,:
The Decedent's Will 9r~ate~twoirrnvocab,leJrusts, ainarital trnst(TrustA) a residual trust (Trust B). Id.
The sole income beneficiary of Trust A and Trust B was. Marion Grahek, .also known as Madon Grahek-Atklnson. Id.
The Remainder Beneficiaries of Trust A are; the beneficiaries identified Mrs. Grahek Atkinson's estate plan or, if no plan exists.to the corpus TrustB, The Remainder Beneficiaries of Trust Bare the children of Decedent and Marion Grahek-Atkinson and include Objectors, David J. Grahek and Philip L. Grahek, Id.
Trust A also contained aprovision ·that Tn1stee pay principal to Mrs. Grahek-Atkinson fo,r her support, Go.mfort art~[Wyllb.e.ing,w.h¢never the Trustee d.~t¢nnin.e$1hut the;income.o(my wife.from all sources, Including thfs·trust; is11ots.ufficfo11t for hersupport, comfort wen being." See Decedent's Will,
TrustB also contains a provision forthe paymehfot'cofpus Mrs. Grahek-Atkinson if Trustee deenis·sttchpaymehtnecessafy. Id.
TheTrusts ifiiUally named NationalCenttaLB·ank:as Trustees, which b:ecame Wadtov:ia Bapk, N;A; and.)he11 We!ls.f~rgo B.m,k; N.A; S~~)oit#Stipufotk,ri o(F.acts,
The primary asset of Trust AJmd. Trnst II V/;l~ a parqeLof re.al esiate hr c~n :fornhrwhlc;h sustained a commercjalpuiI4ing (her-ein~Jter "Piaceniia ?ropprt/1i Jcl,; N.T. p, 2J; :IL s:-fo;
Trust A heid24~t9%.ofthe real estateassetwhile Trust Bheld75.8l%ofthe real.estate .asset; .Join; Stipulation of Facts~ N.t .• p. i 6:0, ll..11·14:,
Wells Fat"golfar1kWa,$ aware thatthe·:orange County $¢hQol.Pfafrfotwasfot¢r~stedin acquiring the Placentia Property as early as 2003 or 2.004 M.dmightr¢~9rt emlrtent~fornain.
Joint Stipulatj9n0,f :Facts; N.Lp. l}; u, 12:.24,
The Placentia Property was sold under threat ofcondemnation on August 28, 2006for a sales price of $8.7 MUUort. Joint Stipulation of Facts; N.T. p. 22, 11. 5-8; p. 26, II. 12-19.
The. net gain on Placentia Property was $8,2 Million. Joint Stipulation ofFacts. While the Trust held the Placentia Property, it produced approximately $200;000 to $300,000 a year for thelife-time beneficiary, Madon Grahek-Atkinson. N;T; 430, IL 12-18.
A I 033 Like-Kind Exchange is a reference to the Tax Code which.is applicable where an initial property is taken through eminent domain or condemnation and a new property can be *12 acquired; without any capital gains.tax' consequences, so long as acquisition. takes place Withing 3' years from the Md.:ohh¢'yeat i11whichtl)e;qond¢rnr1at{on acfrvffyo~c_µrted. Joint StiJ?:Ulatibn:qf,F~cts; 'N'.Ti p. 462; U. J3.-l8;:p,: 4691 H.-18-42.-
The-Federal T~xReiurn~ and. the Califqm:ia·State T:~:K·Retim1s{or 200(5 both reflected an intention to.complete a lOJ3 Like-Kind Exchange. foi'tit:Stiplilatiori-of Racts'f JointExhibits.B C; 'N:T. Ji; :21J. 1 - p; 2s,. 1. 23.
The deadline to complete the· l 03:3 ti.ke~Kind. ·Ex.dhange:Wt\S December 3 L.2009, Joint :stfputa,ti<m ofFacts;
At some point in 200$., Attorney St~phenJ.-Schurnadberb:~gan prepariug' a: legal opinion regardirrg .. al033. exchange. A.draft of'hfs initial research was provided Afforney Gerald Williams correspondence ahd'<it teferehced :ate.qµesrdate .of April :i6.,. 20{)'5,, N.T. p·. 24, 1.3- p. 25.' LIS.
The: draft the_:r~s~a.r_ch ·-of-Attorney $chitmMJ\er Wa$';ina.r.l:<~.d Dtaft for Jpfo:rn;1aHon Purposes only:'; and.was not completed, $.ee'Ex.bi.bit .(h3Ql and.N.r. p/2.5~ 1.16.-.p/26, l- 8.
In arr e-mail.dated October 3, 200~,David. Grahele raised concerns about the ramifications of his mother's death on completing the 1033 Exchange. -See.G~26i N.1'.: p, 41, L 1- p, 43_, l..6;
As a result of Mr. David Grahek's.inquiry.Trustee sought to obtain a legal opinion regardtng the issues raised in the October 3, 2006 correspondence, N;T: p. 43, 11. 7-23.
Mr. David Grahek.testified that he agreed to obtaining thelegal opinion of Tom Bergen, an attorney in Lancaster County, to address his concerns about the 1033 exchange and the possible death of his mother. NT p, 43,.11. 7 - 23.
Wells Fargo Bank paid Attorney Bergan $4,825 to prepare his legal opinion. N.T. p. 250, *13 1:7 - p. 2511. I .
. Attomey Berganptepared .a.6 page legal opinion' dated December ls, 2()06 wherein he Jhatth1;: specific!llly identifies '.qµestiqn.conc~ms the,abil~ty of'thetrusts .: or the.remainder beneficil;\f.ies tq elect to defer some qr ell.of the gain from conversion; •. i after-the demise of Mrs. Grahek-Atkinson." See.Exhiblt G-45.
Wells· Fargo Ba11k·proposed 'to invest 20% o:£ the. fundr recefved from' the sale· of the Placentia Property in short-term Investments aud the rest. W.e>uld beplaced irra "combination of' in_coro.¢ stocks; growth. stt:>~ks; ~ fullr·diver$ffied.portfdU9 ~f.larg~~cap; mid-cap, small-cap, .internatjhnal emergtng.matkej-srocksand fix~d~fnqo,ne basedon' themodern portfolio. theory", N;:Lp;)03, L 2l~'P• ,304,J,5:i p, 30S; IL 17°~3.·
Wells Fargo segregated $2;210,000:00·ah&111vested that in Money Market Accounts earning an average of4 to 4;5% to coverthe costs of'the:CapitaJGai.ns taxes due Ori the sale of the Placentia Property if the: I 0~3 exchangecould not occur: Jolnt Stipulation of Facts; N.T, p.
J.52 [1] L".2$:. p. 153·,J.22.:
The fu,pdsrenuuningaft~r sequestratlcn qft4~,$2,_1, Million for laxes totaled approximately $6.5Mill.ion.a,rid. wererinvested inabalanced pornollo that utilized Modem Portfolio Theory. N.T. p. 338,.IL 2- 6; p. 339, 1. 11" p. 340,, 1.23.
The money invested by' Wells Fargo in the dfverstfied portfolio was held .in investments that could be readily converted into cash. N.T. p. 234, 11. 5- 13.
From the beginning, Wells Fargo intended to seek non-recourse financing. and utilize $2-1 Million invested for paying capital gains taxes as a down-payment on a replacement property. N.T, p. 154, 11. 4-20.
The initial Wells Fargo strategy was to purchase a properly utilizing approximately $2.1 Miilfon a:nd non·recou.rse financing for thetemaining purchase ptfoe·to avoid payirig Capital Gains Taxes on the-sale of the· Placentla Property and allow theaapproxiniat~ $6'Million remainingfrom the: sale to-beJre~ for.investment, N.T .. p; 158, l, 2.1- p, l5.9;l7;
Mr. Mar~ Allen t~stWed thattbe'investments:Jn Grahek portfolio could have been. three {3} days in order- to purchase a' pr6petfy under a 1033 exchange. N.T. p. .liquidated.within :336, 11. t7- Ht
Mr. Mark Allen, who served asjht? Trust fovestwe11tOfficer and 'who no !Qn~er work$ for Trustee, testified that they had.two groups they had to sati'sfy with. their choice ofinvesiments; the income p·enefic.i~'Y the growth of:capitaJ 'forthe resi<Jvalben~fi()iarie.s, J\T.T .. p,3'.43, h 20· p. ~44. L8\p 3.~2, Ur 17"24i, for Objectors also' acknowledg~lthat ''[t]his·is)i.spliHntetest
Ms. Spencer.the-expert ·trust. 'there's ah incon1ebeneti:dary, Mrs. Gi'ahek, who was to received thefocome, andthe remainder beneficiaries who were receive. the. principalwhen Mrs; Grahek passecf away. So the trustee.has duties to both sets of benefiqiatie$, and H's trustee's responsibility to provide incomeferthe income beneficiary and.to preserve andincrease the principal for the principal beneficiaries." N.T. p. 559, 11. 8-17.
The Bank's investment policy for the Trusts was provide Mrs, Atkinson with approximately $300,000 in annual income. N .r, p. 344- ll. 12-25.
The Trust investment officer, Mr. Mark Allen, testified that "one of my objectives, because we talk about preservation of principal, one of mine was preservation of buying power.
That, to me, was extremely important, to stay above what was happening in real estate. If the
real estate market went down, my portfolio went down, as longas t stayedabovewhat they were looking to reinvest in, we were sm1 accomplishing whiit·wewer.e tt.Yh1g do. I' was more .. ~ as much afraid of real estate moving 1.1p dramatically !,lJ1d 'th¢ir buying.powetdropping precipitously." .N.T. p . .346, 11. 12- 23.
Trustee avoided investing in ant subscription-based fove~ftri1ents witha'Iock-up period so that-the-invested funds couldbe accessed quickly if an appropriate· 1.033 ptoperty foukthe located. NS. p. 3.5~, U.8~2d.
On. J une.l S, 2Q01:, Paul Bernett, a. r~gicm~J. man~gfo$ 4itect~r for real ¢stat~]l$Set managementwith Trustee. who wasassigned tothe Grahe]; Trastsadvisedanofher me.m'ber·of'the real estate department that the M~naging·Directors·for:the:Bankwoul~ not-approve a.leverage -ratfo o'f greater than 50% Of any real estate purchased, N.1\p. 379,.1.·23 ° p. 381;:L 7;
On February L5, 2008, afterbeing advised. by Mt. Geo:i;ge·George th:at.nan~recoutse . . . financing W(:\S no longer available, Mr. aerne.tt Wi th'the R.¢'~1 'Est~teibep~rtinent 'or the Bank .suggested purchasing a replacement property at l 00% oNhe: cost ·N'.r; P'· ::3 8,5, L l 7 • p. 3 8'6; 1..3; ·p.3$7, II. 16-20.
In 2008, approximately two years into the search for areplacement properly, Wells Fargo Bank.also sought thelegal advice of Attorney N. Brooke Gabrielson who was asked address impact creation of an LLC would have on a 1033 exchange, in' avoiding Capital Gains i6. Taxes. N.T.p.251,1.20-p.253,l.ll;p.399,l.
Attorney Gabrielson of Howse & Brown submitted a 6 pa.se legal opinion elated September 15~ 2008 which addresses the issues raised Mr. Paul Bernettin his e-mail to Attorney Gabrielson of August 29, 2008. See Exhibit WF-195; Exhibit WF- correspondence *16 260.
The Howser & Brown Opinion asked, in part, ifa:U the equity had. to he reinvested for purposes ofa 1033 exchange. N.T. p. 397, I. 16;. p. 398,J.17,,
From October l, 20.06 until JµneJO, 2009, Tru.st A earned $248,501 and TrustB earned: $876,974. N;T, p. 361, 11. 14~ 17; p. ~62,l.:23~ .p •. 363',LlO,
Mr. Mark Allen.who served as a.Vice President-and.Investment Strategist with Trustee, was asked abouttwo of the sales of stock; ,namely th'e purchase of $270,000'worthof Lazard, Emerging Markets Portfolio on April 30, 2008.and.Wells.Fargo'Advantage Endeavor Select on December 11, 2008. N.1'. p. 333, l.19'- p,33'4, I. ]6,
Mr. Maloney testifie<l that Wells Ear~o "made everyeffor(l:>aseq on .the l?apenvqrk thatI reviewed, to seek outa property th~t consisted orhad tpe qqaUficaW;m,s tpe.yrequired, acting in a fiduciary capacity, to acquire aproperty in alQ3J,exchnnge/' N,T, p.5'84;l.22- p. 585\ LL
On June 9, 2009, Trust B purchased afepiacemehtprdpertyfo Chattanooga, Tennessee using $4.6 Million in cash and liquidated secudtfos and $4, 134,bOO in non-recourse financlng for a total purchase price of $8.7 Million, Joint Stipulation of Facts,
On September 23, 2009, Trust A and Trust B purchased a replacement property in Canton, Georgia using $2.6 Million in cash and liquidated securities and $1. 1 million in non- recourse financing for a total purchase price 3 .7 Million with Trust A owning 75% of the property Trust B owning 25% of the property. Joint Stipulation of Pacts.
On October 16, 2013, Marion Grahek-Atkinson died. Joint Stipulation of Facts.
CONCLUSIONS OF LAW
Trustee had a fiduciary duty to both the lifetime income beneficiary, Mrs. Grahek- *17 Atkinson, as well as the remainder beneficiaries, The sumdard of care lmposed upon the Trustee is that identified 'under the Prudent Investor Rule, 20 Pa.0 $ .. ·§720"1, et, seq. Essentially; "[a) fiduciary shall Investandmanage property heldin a trust es !:l. prudentinvestorwould, by considering the purposes, terms and other circumstances of the trust.and by pursing an overall investment strategy.reasonably suited to the trust." 20'.Pa.C.$. §7203(~). When making investment decisions, a.fiduciary·''shall :consider,. arMng other things, the extent relevant the decision or action:
( l) the size of'the 'trust;
(2) the nature and' estimated duration of the fi~uci~ rel~tio~~bip; (3) the liquidityand'distributionrequlrements ofthetr4~t;: . . . ( 4) the expected tax consequences 'of investment deoisions or strategies and.of distributions ofdncome and ptirtdj:>al;
(~) the role that. each Investment or.course of actfoh plays 11\ overall investment :sttatigy; (6) an asset''s special relationship: or specl&l valQe.;Jf"any; .tcf. the)\lfposes of tr0$tl:frto
·oneor.more:ofthe:beneficfories~,,. (7) to the extent reasonably known to tne fidti~il\ty,Jlte needs ofthe h~m~fici~r_ies for present and future dJstdputib11s .~uthodz~d orrequired bythe ·goveroit1g· instruments; and (8) to the extent reasonably known to the fiduciary, the.income and resources. of'fhe beneficiaries andrelated trusts,
20 Pa.CS. §7203 (c).
The initial burden ofproof rests with the Objectors ..
In general, one who seeks to surcharge a trustee bears the burden of proving that the trustee breached an applicable fiduciary duty, However, when a beneficiary has succeeded in proving that the trustee has committed. a breach of duty and that: a. related loss has occurred, .. the burden of persuasion ought to shift to the trustee to prove, as a matter of defense, that the loss would have occurred in. the absence of a breach duty; We believe that, as between innocent beneficiaries and a defaulting fiduciary, the latter should bear the risk of uncertainty as to the consequences of its breach of duty.
In re Dentler Family Trust, 2005 PA Super 146, 873 A.2d 73 8, 745 (2005) citing Estate of *18 Stetson! 463 Pa, 64, 345 A.id. 679, 690 (1975). "[I]fthe trusteecommits a breach of trust, he is chargeable with (a) any loss ordepreciation in.valueof'the trust.estate resulting from thebreach of'trust; or (b) any profitmade by him through the breach oftrust; or (c) any profit which. would have accrued to the trust estate if there-had been.no breach of'trust," In re. p·axson Trust I, 2006 PA Sup-er 9:, 893 A.2d 99 [1] 122 (~0-06) citihgRestatement (Second) Trusts § 205.
ANALYSIS
Objection 4
The pivotal objection the Trustee's actions and· Investment strategy i.s Obj~qtion4 which states:
4, Obje~tion is .made to eaeh of'the,foll9Wi11g enumerated iriVestrrtents listed on Exhibit ~~A",. attached hereto Mid made a· part lieteof as whotly· inapj>'ropriate in the elrcumstanees of.the trust, as the trust had .sh:ort'.tenrdigUidity.heeds,. trustee elected pursu<r.a_ 103·3' Hke~kind exchange: and the-:rrJstee faHed 1a. [1] ·1n1plerrtentah investment proces_s With appropriate.investment oqjectives time.horlzonsfor 'acquisition' of'replacement pro petty;
At the time· of trial, this objection had-evolved into an objection that encompassed an objection to the overall investment strategy implemented Trustee'.
Objectors assertthatthe Trustee was.under an obligation, asa.fiduciary.fo retain all funds from the sale ofthe Placentia Property in cash or cash equivalents to ensure that there was sufficient cash on hand to purchase a replacement property under section 1033 of the Internal As exhibited above, the Objection filed by Objectors specifically identified a listof investments at issue. However, throughout trial and even in their- brief, Objectors focused on the generalized theory that "[tjhe Bank improperly exposed Trust assets to market risk when those assets needed to be preserved in order to ensure their availability for the completion of a like kind exchange under section 103.3 of the Internal Revenue Code of 1986. ,,· Objectors Brief, p.
29. Little evidence was provided of the specific enurnerated.investments in Exhibit "A" as the presentation of evidence focused more on the choice- of Trustee to place funds in a balanced portfolio rather than retaining the funds in cash,
Revenue Code. Objectors assert that this initial failure.to maintain proceeds in cash, along with the subsequent failures of the employees of Trustee to alter. the investment strategy at various. . .
stages in the' process of flndlng a suitable property, resulted. in a breach.of the Trustee's fiduciary duty, Objectors assert that this purported breach makes: Trustee chargeablefor the market losses suffered by the Trust during thy 2008 stock market, plunge,
The Objectors seekto .havethe.Court' draw fromthe plain language of Trusts to identify the 'intent of the Settler. Objectors assert.that this intertr-should·havebeen the polestar by Which Trustee set Its investment goals. It.is apparenrthat the, Settlorestablished Trust. A'and Trust.B to minimize tax· obligations upon his death. Trustee's actions ofpursuing a I 033 exchange demonstrated a· commitment to th.at goal. .A lQ3} exchange would certairtl.y accomplish Settler's purpose anq minimize tax consequences. Furthermore, a 1033 exchange would have also continued to hold assets in realestate. From the plain language of the Trusts, it is also apparent that Settler-intended ensure his wife, Mrs. Grahek-Atkinson was cared for during her life and that the assets the Trust be safeguarded forthe residual beneficiaries.'
Objectors approach the management of the Trusts from Jhe fundamental starting point that "it was. clear that the.most-important consideration in the management of the Placentia sale proceeds was to keep the assets liquid, that.is, maintain the ability to convert them to cash without loss of principal.as therewas at the timeno.direneed to generate.income or growth." Objectors brief, pg. 42. The Court is not persuaded that the starting polnt was the need to keep The Court also notes. that Settler intended for the Trusts to be administered a corporate entity. It would seem that allowing the two sons of the Settler to serve as Trustees Pro Tern is more afield from the intent of Settlor than any of the investment strategies employed by Trustee.
the assets liquid. Objectors, time and time again, dismiss the duty of the Trustee· to the income beneficiary, their own mother.
This case i$ plagued two significaht issues-that the Court finds persuasive: 1'fame1y, the Trusts in.question served two masters.and the Objectors have the favor of'hindsight, The Trusts were charged with providing Mrs, Grahek-Atklnson with income; The income generated in the Placentia Property consisted of the rental during the time the TrustAssets wereinvested . . . . . .
income of approximately $200,000· $300,000. This was amount of'mcney'Mrs. Grahek- Atkinson had received prior to the sale of the Placentia Property and it was. reasenable for. the Trustee maintain a> stmilar distribution scheme for Mrs. .Grahek-Atkinson during the period ·ot time they were seeking·41033 pro;Pe.rty managing the pro·cee~$ofthe Placeriti.ti Property sale. Trusrees.also had ia.dllfy to thy residual benefici~ries oftp~ True], The rysiquat beneficiaries would obtain the principal upon the death of Mis. Grahek .. Atkiiisoh, Trustees had.a duty preserve and growthis principal for residual beneficiaries.
The second factor of great significance is the gift of hindsight, Hindsight is 11otonly an independent issue but it'interplays with. the Trust serving two masters. The stock market in 2008. Seeing this dramatic decrease in value play out with the unexpectedly fellsignificantly assets ofthe Trust make Objectors quickly jump to the conclusion that the Trustees failed keep assets safe. With hindsight, they identify what they believe should have been done with the assets. But their assertions fail to give appropriate weight to the necessity to provide income to Mrs. Grahek-Atkinson. Objectors would have you believe that all assets should have been kept in cash and that if Mrs. Grahek-Atkinson needed more funds than the income generated by holding money in cash or cash equivalent, principal could have been invaded to provide for her *21 needs. However, invasion of the principal would have been detrimental to the residual.
beneficiaries and a breach of the Trustee's fiduciary duty to them ..
The Court finds that the Trustee fulfilled its fiduciary-duty to the Trusts from the time the Placentia Property was sold until the Trustees Pro Temtook over administration of'the Trusts'.
A review of the .choices made by the Trustee and thetestimony of their employees demonstrates that Trustee complied with the Prudent Investor Rufo.
Atthe time the Placentia Property was sold,Trustee. intertded: to. complete. a J .b:33 exchange. Until an appropriate property could be obtained, TnJ:s(eewas ~iven thetesponsibility to manage the $8. 7 million proceeds from the sale of the property: E_mployees of Trustee testified thatthe funds had generate income provide for Mrs; Grahek-Atkinson and grow principal for the benefit.of the residual beneficiaries. FurthetmOre, the Trustee created a .contlngency plan should an appropriate property not be secured. The contingency'plart. was to . . -· set-aside the amount of capital gains taxes that would be due as a result ofthe sale of the Placentia Property; This set-aside served as the contingency plan throughout the Trustee's administration following the sale of the Placentia Property.
Trustee's employees testified that they initially intended to seek non-recourse financing so that when a replacement property was found, some of the funds trom Trust could he used in conjunction with the non-recourse financing while allowing remaining funds from the Trust to be held in investments. This plan would essentially create a source of rental income for the income beneficiary along with the growth of principal for the benefit.of the residual
~While the account filed Trustee spans a greater time period than that between the sale of Placentia and the appointment of the Trustees Pro Tem, this period Administration is the crux of the litigation.
beneficiaries'. The percentage of Trust funds to be. used in the purchase of a replacement property were subject to alteration through the l 033 process With U1e Trustee. Initially, Mr.
George sought to utilize non-recourse.financing tocover approximately 80% .of thepurchase costofthe replacement properly, orily inte()dh'fgJo. utilize th¢$2Jni1Hon pJacegJrtreserv~.for taxes as cash contribution from l~~ trust N:T. p, 25t H. $-14. However, in-an .e-mail dated June 18, 2007, the real estate department dfocussechhafthe property to be -ptirchased under the 103J Exchange.could not be.leveraged at80%. Mr .. Bem¢tt'testiffodthat the Banies,·~ommhtee in charge of determining whether to. purchase a ptofi'erty would :·no.t :a.pprove hotrc,wlng more'than 5.0% of the purchase price. Nit, p. ·37i I..~ - p 3:S.-l .]. lS,
the Court finds the testimony of Mt, .MarkAlle~ to be extr,~mely. persuasive: Mr, Allen in -fight of.the 1033: exchange. Specificaily,.the testifiecl.apoutQie.inve$tmentgoiilsfotTrustee goal was to invest the proceeds of fne·I>Iatenffa Prcpertyso'that the Tmsts'would.malntaln buying power in the real estate market. In orderto ptovide-1ncorne to Mrs. Orahek--Atkinson and. maintain buying power in the real estate market, Trustee.made thereasonable and sound decision set aside the amount owed to cover pojentfal.capital 'gains taxes and invested the rest of the funds in the market utilizing balanced.portfolio theory. The choice place approximately $2 mill ion into cash or cash equivalents by Trustee was a eontingency plan if ah acceptable 1033 exchange property could not be vetted and purchased. Meanwhile, the. remaining fonds were able to generate sufficient income to provide a source ofrevenue for Mrs. Grahek-Atkinson.
Trustee has complied with the provisions of20 Pa.C.S. §7203 (c) of the Prudent Investor Eventually, the Trusts would hold title to a replacement property and have a significant amount of investments that could be liquidated if necessary. This would also result in the diversification of the assets held in the Trusts,
R..ule. Trustee established a primary goal of completing a i 033 exchange lo rninilnize the tax . .
consequences of the sale the Placentia P:roperty; The Ttu$tc(l ,c;teate<:l af11nq·to pay the taxes if an appropriate property couldnot be. found, Finally; lheTr.t1~tee inyestecf~he funds notset aside for taxes in a manhet in which.theycould'(a} provide income fotMtS. Grahek-Atkinson similar . . to.the.amount she· received irttehtal income from the·Placentia Propetfy~-(b)groW the principal so (ha(theyftiffiiled their o'bligati~rt to tMr¢sidual benefiiiaues; (o) inves; ftirtds·iita manner inwhi~b,"the growth cpllld keep eipace qfthe _l:>qom'ing:real Y,state\mal'ket. to ensure buying power; ;gfrat~gy (utiliibigothyl?a.l~r1ced;portfc>Ho the9ry): to continue :and(d) provide M i.nvestinentsoµnd· grow the assets Ifa 1033 exchange could nor.be accomplished. re.sponsibiHtyto ihcomeJS¢neficla1y as wen asthe Trustee'consideredtheirfi.s.cal .tesidualbertefic1ari~s. trustee:d~monsttated a·commitm~n:n~ Pompletihg a 1033 exchang¢: .. I-Iowever,Trost(te also ccH}$id~re4 dw:ramifi<:.aticms qf not qqmpleting a lQJ!t ¢xcJ1a11ge. and developed a contingent plan.
Objectors make much of the fact thaf window of opportunity complete al033· exchange was-corning to a close Th.istee had net secured a property; whatwould have happened if Wells Fargo had remained Trustee is purely speculative and completely irrelevantto sides. However, agreement, Trustee was replaced.and not one, but two the argumentof'both properties were purchased by the 1.033 exchange deadline. The choice of properties and financing rested solely with Trustees Pro Tern. Trustees Pro Tern were able to buy two properties worth more than the Placentia Property.were able to secure non-recourse financing and avoided capital gains taxes.
Furthermore, it is apparent that hindsight guides the argument of Objectors. Initially, the *24 goalof trustee had been to utilize the·$2 million set aside-for capital gains .taxes as.a cash.
contribution to the purchase ofa replacementproperty. Even the Trustee'samendedposition of only.usiugnon-recourse' financing 'for $0% .ofthe purchaseprice oftM property stili would have resµltedih a slgnffieant-increase in valµe to this trtrsf. Essen(i~lly lhe Trustees :intended to purchase a property worth $8 .7 million ormore, As.stlllli~g a property purchased' for $8'7 million, the Trust'would utilize. $4.35 million to purchase the· property. This would leave $4J5 mitlio11to inve·srfo eithenti:ore,tea:l estate orin a balanced port'foifo. The Trustee's parameters for an appropriate property focluded:a revenue. source. the::prQJ)<Jrtywo.uld pay its o\.V!l mortgage .andyossibly. even create a revenue so wee (if the.rcnta! payments exceededthe costof'payin~ the financing). Once thepayoff:ofthe non-recourse-finarrciug wascomplete, the. Trustwould hold a property worth 'approximately $K7 million as well as rhaihtaidng aninvestmerit'pertfolio with.
the remaining $4.:35 million notused inthe, 1033' e>echange, .excluding anygalns.reallzed during this time periodand without everpaying capital $airt$ on the safe:ofthe Placentia Property. This planwas extremely lucrative and obviously appealing the .ObJectors·who. were readily in agreement atthe start ·ofthe process.
During time in question; Wells Fargo was serving as Trustee of Trust A Trust B, The Trost provisions did not require the Trust seek input or approval of the beneficiaries to make anydecisions. Such inclusion appears have been.done.as a courtesy to long-standing clients. the Objectors started the 1033 exchange process with the expectation thatthey would see returns outlined above.
However, due to the sudden and unexpected collapse of the stock market in 2008, these anticipated returns did not come to fruition during Trustee's term, Objectors, in hindsight *25 and only after the catastrophic declinein the-financial markets.in 2008, sought to find a failure.in investment strategydeveloped Trustee: The.sudden.historic decline in th¢ stock market and n.o.t theactions ofthe Trustee, resulted in the loss ta portfolio value of'these trusts, The fact that the market Collapsed withthe resulting decline in the. portfolio values in the Trusts, does not establish that the Trustee breached its fidi.lciary:duty-to Mrs. Grahek-Atkinson.orto .the residual b:enetldaries;. Based. won theJotalfty t.he·rec.ord, bbJectots;ff;li\.ed .. to mee.ttheir.' burd en of prooftha.tth¢Ttustee bt~a¢hed:its·:f.iduciacy t¢spo1isJbjlitie$, Theyfailed to esta\JJisn: .that tbe Tni$1ee ~hoµl<i be, surchar&~il·for its il)vest,neri~·policjes and decfs!-o~·in the handling ofthe Trusts.
For the.reasons set forthabove, the CourFfitids' thai.tlieTttlstee fulfiiled.its fidi:1cii'aty duty acted in accordarrce-witlt the P.r.ude·nt. Ihv.estor Rule. Objection 5 and Objection 6:
Objection 5 asserts. tfo1i the Trustee felled to sell certain llst¢d ·~ecu.rHies (listed as "~'' tp.i:ougll and'f11cludirig "j''·fQrTrnst A anq h~Ythroµgh and including "h" fcr-Trust.Bjby the.end of calendar year of 2007. Objectors assert that seiffog these securities-would' have.resulted in "locking in" significant capita; losses which could have offset the capital.gains forthe tax return of200i 'Objection 5 ties in significantly With Obj¢Gtion. 6 which then objects to the tax liabilities created bythe purported failure to use t~e sale of'the.securities listed in Objection 5 to minimize the capital gainsdue on value earned by the investments in 2007.
Objectors objections focus in on one calendar year in which. Trustee purported fail to take a loss for tax purposes. However, the actions or inactions of a Trustee cannot be carved out and looked at in a vacuum, Objectors urge the Court to look only at the 2007 year. Trustee, *26 in portions of their supporting brief, urge-the Court. to lookat the period of growth of the Trusts from inception to current day. Trustees seekthe.overly broad wbil.~. th~ QbJe-o_tQ"rs. seek, fhe narrowly constricted; The CO.\lti'Js persuaded neither,
Trustees served for.decades, Ids the dutyof the Trusteefo weigh the benefits of.al! . . actions it undertakes. oh behalf of Its clients; towhom a fiduciary duty .is owed. Yet to freat each ·oalertclar:yearas a-strtct i.ihit of'measuring the.cht>lces of a trusteewculd fail to tru:iy;:adequatdy ·ot,-apprppriately measure, th~ ql1qic,es of fidu.ciary;.
Trustee: did not '·i:,ck-fo t d1pitaf losses fi1.2007;. rn· lnstant.actlen, the.Trustee did then.lock in 'losses ih 2008. Mr; AH:en:testhled that-although.he' could notretne.mbetwhy-he dki.:nol thl<e;the .capitaLg~drts losse.s:1nZ007, ther<:-wereffeas~ns·why you would nqt ~I.ways take capita( gahts. ' '.
. .. ,.. ',,, ;, Iossesin .. a portfoliQ, .However,)v1}. Allen t(lStifj~d thathedld m~e a trade 'in -2.00$:fo:ta.kt c~¢· of'some oflb:e capi.tal gci'.fns.'iq_ the Grahek ponfo.Jiq;.
Objectors have Jailed to demonstrate that.the.Trustee's decision to noi.vlock in" capital .losses was a breach fitluc'lacy-duty: .. Trustadmiltistration of investments under a balanced portfolio scheme cannot be sequestered by year. Each year's investmentsroll into thdolfowing year witlt the gains or IO$S~s following such investments, Furthermore, Objectors have failed.to demonstrate through clear and convincing evidence as presented at time of the hearings that they suffered a loss beyond what wasre-captured ,in 2008. For these reasons, the Court dismisses Objection 5 and 6.
Objection 2
Objectors second Objection is the request in the Petition for Adjudication for a reserve *27 of $7,500.00 for each trust. Specifically, Objection 2 states, in part: .... Objectants strongly oppose establishment of thfa reserve, in .that.
Petitioner seeks only protect itself from. liability sought to be imposed by Objectants for harm the latteralleges it has suffered as a:r¢sultof P~titioner's failure to carry out its fiduciary dt1Hes·, Permitting such a res~tv~ doesnot and cannot inure to the best interest of'the trust, nori.ts penvfici!).l'ie~r and in the circumstances is suggestive of'waste rnismanagernent, '()bjectant.subn,it.S that such a reserve ispatently inappropriate in lhe circumstances, For reasons set forth more fully above, the Trustee-Was foundto have norbreached any fiduciary duty.
To "reserve", as defined Bl.ack's LawDictfonary> means. [11] [!J<tl<e:ep back.to retain, to keep in store for future or special use, ~d fo retain or llq(d..'9verfo af(lture time," 4 1" Edition.
Trustee requested a retainer o f$7 ,500 .. 00 in each tr.qst<to p'-}t row~rd~ poJential(Uture expenses associated with-litigation surrounding the filing:oflheir'Accounts .. Trustee has beenfound, as discussed at great length Above, to. have acted 1;1pprppriatdy·regardingili~ management oftbe Trusts at issue. 'Furthermore, the request of a.reserve of $7,500:0,0'0 fo each trust is slight when takinginto consideration the portfolio value of'fheTrusts, and tp·~--~.ompt~xity'and years of litigation;
The Court finds thatthe.request of a reserve.of $7>500.00in eachtrust is appropriate given that Trustee carried out.its fiduciary duties",
Objection 3 Upon the entry of this Opinion, it is foreseeable that Trustee will file.a subsequent Petition for the payment of their costs and attorney fees associated With defending their actions as Trustee. Obviously, $7,500.00 requested reserve could be credited towards the payment of that bill. However, as of the time of the hearing, Trustees had not submitted any Additional Credits to be reflected on the Adjudication their Account and thus the $7,500.00 remains intact as a reserve in each trust.
Objectors third Objection raisesconcerns aboutTrustee's decision to seek not one but two legal opinions with regards to the 1033 exchange, Objectors believed that(sce~iti~ these opinions: was redundant especi~lly:ip)ight ofth~.-f.acfth~t ~ draft ppi1J_fon'h11d been f01:mtila{ed.by an Attorney. prior to two opinions in -. question. Specifically, Objector~ Objection::under: 1n1st "B" is:
J. O~iecdon:fa made.to.the Peti.tfonet's_pr.0:¢1.mmte.rtt of.two .(2).separaw opinlon:s with regard the elements and. time ;con;tra'hm of a· 1033 .ti'ailsactfon as well as a, ·neru.:ly con1plefethitd.opinj'q_n. The·st19je.~to1?ihf0.n.$.:addtes~ th.e s~:~issues::and. represent a wasteful -tedundanc:1'!i1fthe:cfrcurrisrah'ces .. O~JectfonHnnade.to.'fo_g~i. fees paid as-a D~~b1,1,rs~m<mt,of~rincjp~Ftp Steph~IJ), :Sc:hurn:aqll~r,.fo.rJqe,nearly, complete opinion on. o.t··ab.out 8/U/oS:. tbe M1ou.n1:·o.ftlie l>ayrrH;n.Us lieli~~ed to be $4~283.27 7; Objection Is made 'to· iegal fees paid.as a·Disb1.11:sement of Principal Howser ~·:I3r9wq for one·(J)9{t~e .su&Jec( opinlons onoora.bpµt 10/16/08. The amount of the paymentls'belfoved.tcx'be'$3.,.734J'8 8: :1:'uriher objection is.madeto legal fees·paia.ttYHartmah UnderhHi and Bntbaker. alsc comprising at>:fsbi.t(sement of Pdn-c{pal, p'¢~µrrfng on otib<>ut 12/29/06; the amount of which ObJectant.b.elfoves ~ay b~ $2i94-1.00:9 but ·abourwhfoh amount Objectant is uncertain-and requests clarification qf amounts actually paid for each ofthe s.ubjecropihioi1s.
opinion from Attorney Schumacher, an ~(t.o.niey. licensed in Califomia, In fact; testimony _presented Objectors admit in their replybrief thatthe opinion of Attorney- Schumacher was initially requestedby outside counsel, Attorney Gerald Williams, who had also 'worked for the
[7] The Amount of$4,283.27 is reflected in ~he Amended Objections to Trustt'B" while the amount of $1,366.73 .is reflected in.the Amended.Objections to Trust "A'.
[8] The amount of $3, 734.18 is reflected in 'the Amended Objections to Trust "B'' while the amount of $1,145.82 is reflected in the Amended-Objections to Trust "A". The amount of-$2,941.00 is reflected in the-Amended Objections to Trust "B" while the
amount $1,883. 79 is- reflected in the Amended. Objections to Trust "A"..