Opinion
J-S37035-17 No. 1551 MDA 2016
06-30-2017
ESTATE OF RICHARD A. DeVOE, Deceased, Appellant v. JAMES B. MOONEY
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
Appeal from the Order entered August 23, 2016 in the Court of Common Pleas of Dauphin County, Orphans' Court Division, No(s): 2210-0053 BEFORE: STABILE, MOULTON and MUSMANNO, JJ. MEMORANDUM BY MUSMANNO, J.:
The Estate of Richard A. DeVoe ("Estate") appeals from the Order sustaining Objections to the Second and Final Account of the Estate, and imposing surcharges on the Co-Administrators of the Estate, Keith DeVoe and M. Corrine Mahla (collectively, "Co-Administrators"). We affirm.
Richard A. DeVoe ("Decedent") died intestate on October 25, 2009. Decedent was survived by his mother, Mary Rizzo DeVoe ("Mrs. DeVoe") and his father, Richard DeVoe ("Mr. DeVoe"). At the time of his death, Decedent jointly owned a residence ("the Residence") with his domestic partner, James B. Mooney ("Mooney"). The Residence was encumbered by a mortgage, which had been used to purchase, in Decedent's name alone, a commercial property ("Commercial Property"). Upon Decedent's death, Co-Administrators refused to make any mortgage payments on the Residence. Subsequently, Mooney sold the Residence to pay off the mortgage. Co- Administrators sold the Commercial Property on October 14, 2010, for $95,000.00.
The trial court described what next transpired as follows:
On February 18, 2010, [Mooney] filed a Notice of Claim for $138,364.11, representing the original amount due on the mortgage loan for the Commercial Property. On June 10, 2011, Co-Administrators ... filed a Petition for Adjudication/Statement of Proposed Distribution, which included a revised Accounting. [Mooney] filed Objections and a Petition for Surcharge on July 12, 2011. After a hearing, [the Orphans' Court] issued an Order denying [Mooney's] Objections and Petition for Surcharge on July 11, 2012. This Order was appealed, and the Superior Court overruled [the Orphans' Court's] decision, by [an] Opinion dated August 8, 2013, ruling that [Mooney] was entitled to equitable subordination from the Estate. The case was remanded to [the Orphans' Court] to address the remaining objections and request for surcharge.Orphans' Court Opinion, 11/17/16, at 1-2 (footnote added).
On remand, [the Orphans' Court] issued an Order on June 19, 2014, sustaining [Mooney's] [O]bjection regarding his satisfaction of the mortgage debt[,] and ordering the Estate to accept [Mooney's] claim of $132,400.00 against the Estate. [The Orphans' Court] also sustained [Mooney's] [O]bjection regarding the failure of [Co-Administrators] to promptly liquidate the assets of the [E]state[,] and surcharged [Co-Administrators] $23,000.00 for [their] failure to sell Decedent's interest in Monard Testing, LLC, at or around the appraisal price. [The Orphans' Court] also granted [Mooney] leave to pursue a claim against the surety bond posted by [Co-Administrators] in the event the Estate's assets are not sufficient to pay [Mooney] in full for his claim. [The Orphans' Court] overruled [Mooney's] remaining objections and requests for surcharge.
On July 11, 2014, [Mooney] filed exceptions to the June 2014 Order. On July 21, 2014, [Co-Administrators] filed cross-exceptions. [All exceptions were denied by operation of law.]
See In re: Estate of DeVoe , 74 A.3d 264 (Pa. Super. 2013).
On May 1, 2015, Mooney filed a Petition to Compel Accounting. Following the issuance of a Rule to Show Cause, the Co-Administrators filed a Second and Final Accounting. Mooney filed Objections to the Second and Final Accounting, after which the Orphans' Court conducted a hearing on the Objection. On August 23, 2016, the Orphans' Court sustained, in part, Mooney's Objections, and imposed surcharges on Co-Administrators. Thereafter, upon the Petition of Co-Administrators, this Court granted allowance of appeal of the Orphans' Court's Order. The Co-Administrators timely filed a Pa.R.A.P. 1925(b) Concise Statement of Matters Complained of on appeal, after which the Orphans' Court filed its Opinion.
Co-Administrators present the following claims for our review:
A. Whether [Co-Administrators] should be surcharged $14,120.00 for fees paid by the [E]state for storage of Decedent's personalty; $5,000 for fees paid by the [E]state for storage of Decedent's vehicle; and $3,600.00 for fees paid by the [E]state for organizing and re-packing the personalty[?]Brief for Appellants at 5.
B. Whether [Co-Administrators] should be surcharged $15,000.00 for legal fees paid to Attorney Neil A. Grover [("Attorney Grover")] in May[] 2012, and $5,000.00 for legal fees paid to Attorney Shaun E. O'Toole [("Attorney O'Toole")]in January[] 2015[?]
C. Whether [Co-Administrators] should be surcharged to the extent that the amounts [that Co-Administrators] receive when they liquidate the personal property and automobile is less than the appraised values of $11,105.00 for the personalty and $5,000.00 for the vehicle[?]
D. Whether the $22,692.00 of legal fees that the Second and Final Accounting showed as due and owing are excessive and improper and should not be paid by the Estate[?]
Initially, we observe our scope and standard of 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. The Orphans' Court decision will not be reversed unless there has been an abuse of discretion or a fundamental error in applying the correct principles of law.In re Fiedler , 132 A.3d 1010, 1018 (Pa. Super. 2016) (citations and quotation marks omitted).
This Court's standard of review of questions of law is de novo, and the scope of review is plenary, as we may review the entire record in making our determination. When we review questions of law, our standard of review is limited to determining whether the trial court committed an error of law.
Co-Administrators first claim that the Orphans' Court improperly imposed a surcharge upon them for expenses incurred as a result of the storage of Decedent's personal property, the fees paid by the Estate for organizing and packing Decedent's personal property, and for storage of Decedent's vehicle. Brief for Appellants at 27. Co-Administrators present several arguments in this regard.
First, Co-Administrators argue that Mrs. DeVoe was Decedent's sole heir. Id. According to Co-Administrators, Mrs. DeVoe indicated that she preferred to have Decedent's personal property distributed to her "in kind." Id. Co-Administrators contend that, "[w]hen the [Orphans' Court] denied Mooney's Objections to the First and Partial Accounting, ... it appeared at that time that the sale of the personal property was not necessary to pay debts and expenses" of the Estate. Id. at 28. Co-Administrators argue that Mooney had not established the four criteria for equitable subrogation, and accordingly, his claim should have failed both before the Orphans' Court and during the first appeal. Id.
Co-Administrators claim that their actions were reasonable, in light of the fact that Mrs. DeVoe ultimately was to receive Decedent's personal property. See Brief for Appellants' at 27. Co-Administrators assert that Mrs. DeVoe "understood that the storage fees were coming out of what would have been her share of the [E]state, and that was acceptable to her." Id. at 28. In addition, Co-Administrators posit that Mooney's claim for subrogation was ultimately determined on November 18, 2014, and, therefore, "that [day] would have been the first day that [Co-]Administrators became obligated to sell the personal property." Id. at 29.
As this Court has explained,
[b]y statute, one aspect of the fiduciary duty of the executor is to "take possession of, maintain and administer all the real and personal estate of the decedent ...." 20 Pa.C.S.A. § 3311. In other words, the executor bears the responsibility to "preserve and protect the property for distribution to the proper persons within a reasonable time." In re Estate of Campbell , 692 A.2d 1098, 1101 (Pa. Super. 1997). In the performance of his fiduciary duties, the executor must exercise the "judgment, skill, care and diligence that a reasonable or prudent person
would ordinarily exercise in the management of his or her own affairs." Id. at 1101-02.In re Estate of Westin , 874 A.2d 139, 144-45 (Pa. Super. 2005).
When the executor of an estate fails to fulfill his fiduciary duty of care, the court may impose a surcharge against him. In re Estate of Lux , 480 Pa. 256, 264, 389 A.2d 1053, 1057 (1978) (citing Estate of Stephenson , 469 Pa. 128, 138, 364 A.2d 1301, 1306 (1976)). A surcharge is a penalty imposed to compensate the beneficiaries for loss of estate assets due to the fiduciary's failure to meet his duty of care; however, a surcharge cannot be imposed merely for an error in judgment. Id. ; In re Estate of Ellis , 460 Pa. 281, 289, 333 A.2d 728, 732 (1975). Our Supreme Court has held that a standard of negligence is applied when evaluating whether an executor's management of an estate warrants a surcharge. Estate of Stephenson , 469 Pa. [at] 139, 364 A.2d [at] 1306 []; In re Bender's Estate , 278 Pa. 199, 204, 122 A. 283, 284 (1923).
In its Opinion, the Orphans' Court addressed Co-Administrators' claim, and concluded that it lacks merit. See Orphans' Court Opinion, 11/17/16, at 4-5. We agree with the sound reasoning of the Orphans' Court, and affirm on this basis with regard to Co-Administrators' first claim, see id., albeit with the following addendum.
In determining whether Co-Administrators acted reasonably as fiduciaries, the Orphans' Court applied a broader perspective, addressing Co-Administrators' duty to the Estate and the value of its assets. See Orphans' Court Opinion, 11/17/16, at 4-5. We discern no abuse of discretion or error in this regard.
Co-Administrators also argue that Mooney previously had failed to establish the four factors necessary for a claim of subrogation. Brief for Appellants at 28. However, that argument is presented only in the context of Co-Administrators' claim that the issue of subrogation was not finally determined until November 18, 2014, and that their duty to sell the personal property of Decedent did not arise until that time. Id. at 29. As set forth above, we conclude that this issue lacks merit. --------
In their first claim, Co-Administrators also contend that Mooney's request for a surcharge should have been rejected, because he came into court with "unclean hands." Brief for Appellant at 29. Co-Administrators assert that upon Decedent's death, Mooney denied them entry to the Residence, which contained Decedent's personal property. Id. at 30. Because of this, Co-Administrators assert, they were unable to take an inventory or appraise the personalty. Id. at 30. Co-Administrators claim that Mooney is therefore responsible for the storage fees incurred during the administration of the Estate. Id. at 32.
Our review of the record discloses that this claim is specious, at best. There is no evidence that Co-Administrators incurred additional storage fees and costs, based upon any delay in entering the Residence. The record does not reflect that Co-Administrators were required to incur additional legal expenses to secure entry to the Residence. As such, we discern no error or abuse of discretion by the Orphans' Court in determining that Co-Administrators failed to fulfill their fiduciary duty regarding the disposition of the Decedent's personal property.
Co-Administrators additionally assert that they did not act in bad faith, and therefore, the imposition of a surcharge was not appropriate. Id. at 33. Co-Administrators take issue with the Orphans' Court's application of a "mere negligence" standard of care for imposing a surcharge. Id. at 34. According to Co-Administrators, the standard for imposing a surcharge is a lack of due care and willful bad faith—not mere negligence. Id.
Our review discloses that the Orphans' Court set forth and applied the appropriate legal standard in addressing this claim, and we discern no error in this regard. See Orphans' Court Opinion, 11/17/16, at 4-5; see also In re Estate of Westin , 874 A.2d at 144-45 (recognizing that "[o]ur Supreme Court has held that a standard of negligence is applied when evaluating whether an executor's management of an estate warrants a surcharge.") (citing Estate of Stephenson , 364 A.2d at 1306, and In re Bender's Estate , 122 A. at 284).
In their second claim of error, Co-Administrators argue that the trial court erred in surcharging Co-Administrators for legal fees paid to Attorney Grover and Attorney O'Toole by the Estate. Brief for Appellants at 35. Co-Administrators state that they retained the services of Attorney Grover for litigation regarding Objections to the First and Partial Accounting, and paid him a "Reserve" expense of $15,000. Id. at 36. According to Co-Administrators, Attorney Grover successfully defended the Objections before the Orphans' Court. Id. Co-Administrators contend that, although Mooney's Objections to the First and Partial Accounting challenged Attorney Grover's $15,000 fee, that objection was overruled, and Mooney did not appeal. Id. at 37. Therefore, Co-Administrators argue, Mooney could not again challenge that fee. Id.
In its Opinion, the Orphans' Court addressed this claim and concluded that it lacks merit. See Orphans' Court Opinion, 11/17/16, at 5-7. We agree with the reasoning of the Orphans' Court, as set forth in its Opinion, and affirm on this basis with regard to Co-Administrators' second claim. See id.
In their third claim, Co-Administrators argue that the Orphans' Court improperly surcharged them the difference between the appraised value of the Estate's personal property and automobile, and the price realized upon the liquidation of those assets. Brief for Appellants at 45. Co-Administrators dispute the Orphans' Court's use of an appraisal conducted by Mooney, claiming that they were unable to access the property to conduct their own appraisal. Id. Co-Administrators further argue that, the Orphans Court "clearly does not know if such a shortfall in the sale price will be a result of [Co-Administrators] acting in bad faith in the manner in which they conducted the sale of assets." Id.
Once again, we note that a standard of negligence, rather than bad faith, is applied when evaluating whether an executor's management of an estate warrants a surcharge. See Estate of Stephenson , 364 A.2d at 1306.
The record reflects that Co-Administrators had possession of the personalty since October 2010. Notwithstanding, Co-Administrators failed to seek their own appraisal of the personalty. Because the record supports the Orphans' Court's findings and valuation, we cannot grant Co-Administrators relief on this claim. See In re Estate of Mumma , 125 A.3d 1205, 1216 (Pa. Super. 2015) (stating that the Orphans' Court, as fact-finder, is not bound by the testimony of a particular expert witness and is under no obligation to accept the expert's conclusions).
Finally, Co-Administrators claim that the Orphans' Court erred in ruling that the $22,692.00 of legal fees, set forth in the Second and Final Accounting, were excessive, and should not be paid by the Estate. Brief for Appellants at 47. According to Co-Administrators, these fees were incurred by the Estate, "almost exclusively, for services associated with the post-remand litigation and general estate administration, including the filing of the Second and Final Accounting and the litigation associated with it." Id. at 48. Co-Administrators argue that the fees were not incurred as a result of frivolous litigation. Id. Co-Administrators assert that the legal fees were necessary to fulfilling their fiduciary duties. Id. at 49.
In its Opinion, the Orphans' Court addressed this claim and concluded that it lacks merit. See Orphans' Court Opinion, 11/17/16, at 5-7. We agree with the sound reasoning of the Orphans' Court, as set forth in its Opinion, and affirm on this basis with regard to Co-Administrators' fourth claim. See id.
Order affirmed. Judgment Entered. /s/_________
Joseph D. Seletyn, Esq.
Prothonotary Date: 6/30/2017
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