In Re Francis Edward McGillick Foundation

642 A.2d 467, 537 Pa. 194, 1994 Pa. LEXIS 163
CourtSupreme Court of Pennsylvania
DecidedMay 26, 1994
Docket9 and 10 W.D. Appeal Dockets 1992
StatusPublished
Cited by40 cases

This text of 642 A.2d 467 (In Re Francis Edward McGillick Foundation) is published on Counsel Stack Legal Research, covering Supreme Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Francis Edward McGillick Foundation, 642 A.2d 467, 537 Pa. 194, 1994 Pa. LEXIS 163 (Pa. 1994).

Opinions

OPINION OF THE COURT

FLAHERTY, Justice.

This case involves an incidental beneficiary of a trust seeking the equitable relief of removal and surcharge of trustees. The orphans’ court granted the drastic remedy of removal of the trustees, which was affirmed by the Superior Court. 406 Pa.Super. 249, 594 A.2d 322. We granted an appeal by allowance.

The following history forms the background of this litigation. In 1937, Francis E. McGillick created an agreement and declaration of trust which established the Francis Edward McGillick Foundation. The settlor’s will, dated May 26, 1936, was incorporated into the provisions of the trust agreement. The agreement instructed the trustees to create two funds of $25,000 each with the proceeds to be paid to the Roman Catholic Diocese of Pittsburgh for the education of young men for the priesthood and young women for the sisterhood. The agreement further instructed the trustees to invest all other assets of the foundation and to pay one-half of the net income to the Catholic Bishop of Pittsburgh and his advisory board for the purpose of creating as many scholarships as the income would maintain. The recipients of the scholarships were to be worthy men and women of the Roman Catholic faith, between the ages of sixteen and forty years of age, to be selected by the Bishop and his advisory board. The students awarded scholarships would be permitted to attend any school or university, and the scholarships were limited to $200 per student per year for a maximum of four years.

The trust agreement further provided that payment of half of the foundation’s net income to the Bishop for scholarships should cease when the trustees determined that the principal and accumulations were sufficient to establish a fifty-student vocational school. If the Bishop and his advisory board were not interested in the plan for the school, the trustees were [197]*197authorized to carry out the plan without the assistance or participation of the Bishop.

The principal asset of the foundation, at the time of McGil-lick’s death, was the stock of the F.E. McGillick Company. The company, in turn, was the sole shareholder of six subsidiary companies. When McGillick died in 1961, the assets of the subsidiaries consisted almost entirely of fifty-eight parcels of residential and commercial real estate throughout Southwestern Pennsylvania, varying widely in value.

The trust agreement named as trustees and executors McGillick’s three sons and other close relatives, including Patrick Corbett, McGillick’s son-in-law. Upon McGillick’s death in 1961, Corbett was the only named trustee living, and he became one of the trustees. By the time this litigation commenced in 1987, only Corbett remained of the trustees appointed in 1961; the other trustees serving in 1987 were Robert D. Barozzini, Esquire, appointed in 1969, Francis Corbett, Patrick Corbett’s son, appointed in 1977, and Louis F. Anania, an accountant appointed in 1982.

In the early 1980’s, at a time when the diocese was experiencing financial difficulties and had an urgent need for funds to operate the diocesan secondary school system, the diocese proposed a restructuring of the foundation and its assets. The diocese informed the trustees that it had no present or future need of a vocational school and deemed it unlikely that the net worth of the foundation will ever be sufficient to establish such a school. The foundation, upon advice of counsel, declined to reorganize, whereupon the diocese petitioned the Orphans’ Court Division of the Court of Common Pleas of Allegheny County to remove and surcharge the trustees of the McGillick Foundation.

Due to a fire which destroyed many foundation records in 1980, the orphans’ court limited its consideration primarily to the period 1980-1986. Following trial, the orphans’ court entered a decree which removed all four trustees, ordered the filing of an accounting within ninety days, and denied the request for a surcharge. Both parties appealed from the [198]*198decree. The diocese claimed that the evidence justified imposition of a surcharge against the trustees, and that the payment by the foundation of the trustees’ legal fees was improper; the trustees objected to the standing of the diocese, argued that the doctrine of unclean hands should bar the suit, and claimed that they should be compensated for their services during the pendency of the suit. The Superior Court affirmed the trustees’ removal, the order to file an accounting, and the denial of a surcharge. The Superior Court, however, modified the decree to reverse the foundation’s payment of the trustees’ legal fees in defense of this action, and remanded the case to the orphans’ court to allow the trustees to establish the reasonable value of their services to the foundation during the pendency of these proceedings. Both parties have appealed from the order of the Superior Court.

These cross appeals thus present issues relating to the performance, removal, and surcharge of trustees under a charitable trust, issues of standing, capacity to sue, and the unclean hands doctrine of equity,1 as well as issues involving the trustees’ right to have the trust underwrite costs of litigation challenging their fiduciary performance.

The trustees have, throughout this litigation, questioned the standing of the diocese to bring this action. The trial court concluded that the diocese “may incidentally benefit from the performance of that portion of the Trust which provides for the establishment of the two religious education funds,” and the Superior Court held that although the diocese is not a named beneficiary of the trust, the intimate involvement of the diocese with the disbursements of the scholarships is a special, nonpecuniary interest which creates standing to enforce the charitable trust. 406 Pa.Super. at 261, 594 A.2d at 328.

[199]*199Standing requires that an aggrieved party have an interest which is substantial, direct, and immediate. That is, the “interest must have substance—there must be some discernible adverse effect to some interest other than the abstract interest of all citizens in having others comply with the law.” That an interest be direct requires that an aggrieved party “must show causation of the harm to his interest by the matter of which he complains.” To find an immediate interest, we examine “the nature of the causal connection between the action complained of and the injury to the person challenging it.” Wm. Penn Parking Garage, Inc. v. City of Pittsburgh, 464 Pa. 168, 195-97, 346 A.2d 269, 281-83 (1975); 1000 Grandview Ass’n v. Mt. Washington Assoc., 290 Pa.Super. 365, 367, 434 A.2d 796, 797 (1981). In Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 205, 412 A.2d 466, 469 (1979), we cited with approval the Restatement (Second) of Trusts, § 200 (1959): “No one except a beneficiary or one suing on his behalf can maintain a suit against the trustee to enforce the trust or to enjoin or obtain redress for a breach of trust.” We added “grave doubt as to the standing of a stranger to object to the waste of trust assets.” Id.; citing Curtis Estate, 437 Pa. 123, 126 n.

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Bluebook (online)
642 A.2d 467, 537 Pa. 194, 1994 Pa. LEXIS 163, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-francis-edward-mcgillick-foundation-pa-1994.