Kirgan v. Manufacturers and Traders Trust Co.

          MEMORANDUM OPINION

          CLAUDE M. HILTON UNITED STATES DISTRICT JUDGE.

         THIS MATTER comes before the Court on Plaintiffs Mary Anne Kirgan and Robert S. Kirgans' Complaint, as successor trustees to the Plitt Trust, seeking to remove M&T as the corporate co-trustee of the Clarence Manger and Audrey Cordero Plitt Trust (the "Trust"). Plaintiffs seek a declaratory judgment for removal of Defendants as corporate trustee and also bring a claim for breach of fiduciary duty. Defendants also seek declaratory judgment on a number of issues against Plaintiffs in addition to a breach of fiduciary duty claim.

         I. Background

         Plaintiffs filed their complaint in this Court on March 21, 2017, alleging four counts against Defendants. Plaintiffs amended their complaint on August 29, 2017, bringing five counts against Defendants. Plaintiffs brought Count I Declaratory Judgment for Plaintiffs Right to Change the Corporate Trustee, Count II Removal of M&T Bank as Corporate Trustee, Count III Breach of Contract, Count IV Breach of Fiduciary Duty, and Count V Fraud.

         Prior to trial, the Court granted summary judgment for M&T on the Kirgans Count III (breach of contract) and Count V (fraud). The Court also ruled that based on the 1985 Order from the Circuit Court for Baltimore City, M&T could only be removed for cause. This ruling dismissed Count I. This left only Counts II and IV and the Counterclaims for the Court to decide at trial. This Court began a bench trial on February 21, 2018, which continued until February 22, 2018.

         II. Findings of Fact

         Based on the evidence adduced at trial, the Court makes the following findings of fact.

         1. The Plitt Trust is a testamentary charitable trust created by the Last Will and Testament of Clarence Manger Plitt (the "Will"). Mr. Plitt signed the Will in 1976 and died four months later.

         2. Prior to his death, Mr. Plitt lived with his long-time partner, Mary E. Mc.C. Kirgan ("Mary Kirgan"), and her children Plaintiffs Mary Anne Kirgan and Robert Kirgan. Clarence Plitt raised Mary Anne and Robert beginning from the ages of 5 and 10 respectively. Although Mr. Plitt and Mary Kirgan never married, the Kirgan children considered Mr. Plitt to be their stepfather. The Kirgans spent considerable time with Mr. Plitt during his life.

         3. During the time Mr. Plitt lived in Mary Kirgan's home, he spoke of his intentions for the Trust and his philosophy of charitable giving. He wanted to set up a trust that donated money to educational institutions specifically to provide students with loans.

         4. The Will provided that "the original Trustees of this trust shall be the First National Bank of Maryland and Mary E. McC. Kirgan, if living."

         5. After Mary Kirgan died the Will provided that she be succeeded by two individual co-trustees. When Mary Kirgan passed away in 2004, Robert and Mary Anne Kirgan became the successor individual co-trustees of the Plitt Trust.

         6. The corporate trustee First National Bank of Maryland was acquired by M&T Bank. M&T is based in New York.

         7. Following Mr. Plitt's death, Mary E. McC. Kirgan, one of the original named trustees in the Will, contested the Will. The Will was probated in Maryland. The Maryland Court issued an order that M&T Bank could only be removed for cause.

         8. The Trust awards funds to educational institutions that agree to use the funds for student loans.

         9. The Will requires the trustees to distribute the entire net income generated by the trust at periodical intervals no less frequent than annually unto and among educational institutions as they shall from time to time select and determine in the respective proportions among such institutions as the trustees shall determine.

         10. The Will establishes requirements for distribution of funds from the Plitt Trust to educational institutions for school loans. Specifically, the Will requires funds from the Plitt Trust to be used by educational institutions to make loans to deserving secondary school, college or graduate students, who by reason of poor or less than ample family financial circumstances, need monetary assistance to embark upon or continue their education. Selected educational institutions must agree to use funds received from the Plitt Trust in accordance with the terms of the Will.

         11. The Will identifies considerations that are left to the discretion of educational institutions that receive funds from the Plitt Trust. For example, the selection of students, loan amounts, repayment dates, and other terms and conditions pertaining to loans shall be determined from time to time solely by the respective educational institutions(s), provided that the standards and criteria employed in making such determinations shall not discriminate against any particular type or category of student.

         12. The Will precludes the Plitt Trust from having any right, claim or interest of any kind in any interest or principal repayment emanating from loans made by the respective educational institutions. Instead, to be used by respective lending educational institutions for such specific uses in furtherance of their educational purpose as they shall desire from time to time.

         13. The Will prohibited any payments or contributions from the income of the trust except in furtherance of charitable, religious, scientific, literary or other educational purposes. However, payments of trustees' commissions, expenses, and all other charges or costs reasonably incurred from time to time in connection with the administration of the Plitt Trust were to be deemed in furtherance of said purposes.

         14. Mr. Plitt prepared a Memorandum that accompanied the Will that discussed his personal philosophy; however, he acknowledged that the trustees need not look beyond the four corners of the Will instrument and that the Memorandum was not intended to be binding in any legal sense on the trustees.

         15. Kenneth Hornstein, an employee of First National Bank of Maryland (and later M&T) from 1990 until March 2011, was the Trust officer who oversaw the responsibilities for the Plitt Trust. He worked with Mary E. McC. Kirgan, who was then the individual trustee. When Mary E. McC. Kirgan died in 2004, Mary Anne Kirgan and Robert Kirgan became the successor individual trustees by appointment. The trustees oversaw and issued school loan contracts on behalf of the Trust.

         16. In the early years of the Trust's existence, the trustees established a protocol by which the Trust carried out its charitable giving. Each year, the individual trustee selected the educational institutions that would receive the Trust's grants and the amount of grant that each institution would receive. One or all of the trustees then wrote the contracts between the Trust and the school that bound the institution to use the received funds in accordance with the Will. The ...