Schautz Trust

151 A.2d 457, 395 Pa. 605, 1959 Pa. LEXIS 661
CourtSupreme Court of Pennsylvania
DecidedMay 28, 1959
DocketAppeals, Nos. 161 and 162
StatusPublished
Cited by11 cases

This text of 151 A.2d 457 (Schautz Trust) 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
Schautz Trust, 151 A.2d 457, 395 Pa. 605, 1959 Pa. LEXIS 661 (Pa. 1959).

Opinion

Opinion by

Mr. Justice Musmanno,

• • On July 31, 1937, Mrs. Phenie L. Schautz entered into an inter. vivos trust with the Scranton Lackawanna Trust Company (now the First National Bank and Trust Company of Scranton) whereby, after her death, the Trustee was to pay the net income of her estate to her husband for the term of his natural life, and then, upon his death,1 according to the Third Paragraph of the trust agreement, “the Trustee shall pay, transfer and distribute the corpus of the Trust Estate (or the remaining portion thereof, should any of the corpus have been distributed as hereinafter provided) to Walter J. Schautz, Arthur G. Schautz, George J. Schautz, Jr., and Helen M. Boyle, children of the Donor in equal proportions.77

The Ninth Paragraph of the Trust Agreement guaranteed to Mrs. Schautz revocation rights as follows: “It is understood and agreed by the parties hereto that [607]*607this trust is made subject to the right which is hereby specifically reserved to the Donor to terminate and revoke the same at any time upon sixty (60) days’ notice in writing thereof to the Trustee, and upon such termination or revocation, the Trustee, shall assign, transfer and deliver the trust estate, both principal and accumulated income, if any, to the Donor freed and discharged of any trust whatsoever.”

Acting under this revocation clause, Mrs. Schautz on April 25, 1955, revoked the Third Paragraph of the Trust Agreement by stating: “1. That the Third Paragraph of said Trust Agreement as previously amended2 has been revoked in its entirety and that said Trust Agreement is now amended to read as follows

Whereupon there was substituted a new paragraph which, by the process of omission, excluded Arthur G. Schautz and Walter L. Schautz, and made George J. Schautz, Jr., and Helen M. Boyle, the sole beneficiaries of the corpus of the estate.

After setting forth the new Third Paragraph, the instrument declared: “That all other terms and conditions of said Trust Agreement to remain unchanged and are hereby ratified and confirmed and are to remain in full force and effect.”

When Mrs. Schautz died on December 13, 1957, leaving her four children to survive her, the Trustee, following out the provisions of the new Third Paragraph, petitioned the Orphans’ Court of Lackawanna County to award the principal and income of the trust estate to Helen M. Boyle and George J. Schautz.

The disinherited two children, Walter and Arthur Schautz, objected to the proposed distribution, averring that their mother had no power to exclude them [608]*608from tlie benefits of the trust estate. They specifically declared that while their mother reserved the right under the Ninth Paragraph of the Trust Agreement to revoke the agreement in toto, she could not alter it by amendment and that, therefore, they being two of the original beneficiaries, they were entitled to share in the distribution equally with their brother George J. Schautz, Jr., and their sister Helen M. Boyle.

President Judge Beady of the Lackawanna County Orphans’ Court agreed with this contention and on June 6, 1958 filed an adjudication in which he declared the instrument of April 25, 1955 ineffective. However, after exceptions to the adjudication were filed, President Judge Beady altered his original view and then said: “Further study and perceptive analysis of the agreement of April 25, 1955 impels the court to say it was unduly impressed with the form, rather than the substance of it. This occurred because the agreement, unfortunately, thrice uses the word ‘amended.’ He then went on to say that the deed of April 25, 1955 “was a termination and revocation of the original trust agreement and the creation of a new deed of trust wherein George J. Schautz, Jr., and Helen M. Boyle were designated sole beneficiaries,” and he thus decreed distribution to them in equal shares.

Although the lower court is to be commended for its open-mindedness in approaching a revision of its original adjudication and in arriving at a correct conclusion in the end, we cannot agree with its reasoning that the instrument of April 25, 1955 constituted a revocation of the original agreement and that Mrs. Schautz, in effect, rewrote the trust agreement.

It is not enough that a court reach a proper result. The route it follows in reaching the destination is quite important because, if the route is circuitous and unreliable, those who follow may become lost and not come [609]*609out at the point headed for. Thus, we must point out the error in the reasoning processes of the learned court below.

Mrs. Schautz did not in Paragraph 9 of the original trust agreement limit herself to only a complete revocation nor did she in her deed of April, 1955, actually completely revoke the original trust agreement. In fact, in her later pronouncement she specifically stated that she intended only to “amend” the trust agreement by revoking the third paragraph and substituting another in its place. All the other terms and conditions were to “remain unchanged” and they were “ratified and confirmed” and were “to remain in full force and effect.” It is obvious that this language cannot be interpreted as meaning a complete displacement of the original agreement by another one entirely different.

The court below construed the Ninth Paragraph of the Trust Agreement as permitting Mrs. Schautz to revoke the trust only “in its entirety” and applied the rule set forth in Section 331 of the Restatement, Trusts, and Section 331 of Scott on Trusts, that where a settlor merely reserves the power to revoke the trust “as an entirety” he has no power to partially revoke or modify the terms of the trust. It is our opinion, however, and we so hold, that the indicated rule applies only where the settlor limits, expressly or by inescapable logic his power to revoke the trust “as an entirety” or “as a whole” or “in toto” or in any other language achieving the same effect.

In fact, when the rule is mentioned in the Restatement, Trusts and in Scott on Trusts, the term “as an entirety” is placed in quotation marks, indicating that it is being quoted from a trust agreement. In the case of National Newark & Essex Banking Co. v. Rosahl, 97 N. J. Equity, 74, where the rule was applied, the [610]*610Court made clear that the trust agreement specifically provided that “the right reserved to the trustor was to ‘revoke as an entirety this deed of trust’ The court then went on to say that “the language of the reservation” did not admit of a power to modify by implication.

In the case at bar we have an entirely different situation. The Trust Agreement does not say that it can be revoked only in its entirety. It does say, it is true, that upon the donor’s “termination or revocation, the Trustee shall assign, transfer and deliver the trust estate, both principal and accumulated income, if any, to the Donor freed and discharged of any trust whatsoever.” But this is only a direction as to what shall happen to the proceeds of the trust in the event there actually is a total revocation. The language employed does not prohibit the donor from revoking in any way she sees fit. Unless there is an express restriction, or one by necessary implication, that the donor may revoke only in toto, all doubts are to be resolved in favor of the donor whose property has become the subject of the trust. There is nothing in the original Trust Agreement which compels the interpretation that Mrs.

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Bluebook (online)
151 A.2d 457, 395 Pa. 605, 1959 Pa. LEXIS 661, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schautz-trust-pa-1959.