K. Snizaski and C. Vilsack v. Public School Employees' Retirement Bd. ( 2014 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Karen E. Snizaski and :
Christine M. Vilsack, :
Petitioners :
:
v. :
:
Public School Employees' :
Retirement Board, : No. 1329 C.D. 2008
Respondent : Submitted: April 24, 2014
BEFORE: HONORABLE DAN PELLEGRINI, President Judge
HONORABLE BERNARD L. McGINLEY, Judge (P)
HONORABLE PATRICIA A. McCULLOUGH, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE McGINLEY FILED: August 13, 2014
This matter is on remand from the Supreme Court with instructions to
consider three outstanding issues raised by Karen Snizaski and Christine Vilsack
(Friends/Appellants) in their original appeal from the order of the Public School
Employees’ Retirement Board (Board) which declared Willette Gallman (Gallman)
the Principal Beneficiary of the balance of Six-Hundred Eighty-Eight Thousand
Five-Hundred Fourteen dollars ($688,514.00) in Sandra Lapcevic’s (Decedent)
Public School Employees’ Retirement System (PSERS) Account.
Procedural Background
On May 29, 2009, this Court reversed an order of the Board which
upheld as valid a Nomination of Beneficiary Form, which was altered by Gallman
with “Wite-Out” to designate herself the Principal Beneficiary of 100% of
Decedent’s PSERS Account. This Court held that the altered Form did not meet
the technical statutory and regulatory requirements of Section 8507(e) of the Public
School Employees’ Retirement Code (Retirement Code), 24 Pa.C.S. §8507(e),
because the Decedent did not re-execute it and the changes made by Gallman using
“Wite-Out” were not initialed by Decedent.
Based on this Court’s ruling that the altered Form was per se invalid
under 24 Pa.C.S. §8507(e), this Court did not address three alternative issues raised
by Friends/Appellants.1
The Supreme Court granted Gallman’s petition for allowance of
appeal to consider one issue:
Whether the Commonwealth Court correctly interpreted
24 Pa.C.S. §8507(e) to require in this case that a Public
School Employees’ Retirement System nomination of
benefits form must have been completed entirely in the
hand of the member/decedent in order to effectuate a
valid change of beneficiary designation.
In a decision dated May 28, 2013, the Supreme Court reversed this
Court and held that 24 Pa.C.S. §8507(e) does not require nomination of beneficiary
forms to be completed by the member or that changes must be made in the
1
Specifically, Friends/Appellants argued that the Board disregarded clear and convincing
evidence of a “confidential relationship” between Gallman and Decedent and that Gallman,
having access to all of Decedent’s important mail, either designated herself as Principal
Beneficiary without Decedent’s knowledge or consent, or “unduly influenced” Decedent to agree
to designate her as Principal Beneficiary. Appellants argued that the Board erred because it
failed to shift the burden to Gallman to show that the beneficiary designation was procured
without taint of “undue influence” or deception. Appellants/Friends also challenged Gallman’s
competency under 42 Pa.C.S. §5930, commonly referred to as the Dead Man’s Statute, to testify
about her conversations with Decedent and relay what the Decedent allegedly “told” her about
whom Decedent intended to receive her PSERS death benefits and that Decedent “told” her what
to write on the Nomination of Beneficiary Forms.
2
member’s own hand and that any such requirements are unreasonable and
impractical.
The Supreme Court remanded the matter to this Court to review the
following remaining issues raised by Friends/Appellants:2 (1) whether the Board
erred because it failed to consider the “confidential and fiduciary relationship”
between Gallman and Decedent and the resulting presumption of “undue
influence;” (2) whether the Board erred because it failed to shift the burden to
Gallman to show the absence of deception, that she took no unfair advantage of her
relationship with Decedent and that Decedent’s designation of Gallman as
Principal Beneficiary was fair and beyond suspicion; and (3) whether the Board
erred because it failed to exclude Gallman’s self-interested testimony about her
conversations with Decedent under the Dead Man’s Statute.3
Factual Background
Decedent was a school teacher in the Penn Hills Area School District
for 35.5 years. She was a member of PSERS.
Gallman was Decedent’s tax accountant for over 30 years. Gallman
began her business relationship with Decedent when Gallman was employed by
H&R Block. Gallman saw Decedent about once a year. Transcript of
2
On review of a final adjudication of an administrative board, the Board is the ultimate
fact-finder, and our scope of review is limited to determining whether it committed an error of
law, constitutional rights were violated, or the Board's factual findings were supported by
substantial evidence. Dowler v. Public School Employes' Retirement Board, 620 A.2d 639 (Pa.
Cmwlth. 1993).
3
All issues were properly preserved by Friends/Appellants.
3
Proceedings, September 12, 2007, (H.T.) at 37-38; Reproduced Record (R.R.) at
96-97.
In 2001, Gallman learned that Decedent, who lived alone, had
Parkinson’s disease. At the time, Decedent was still working as a teacher but she
was assisted by an aid in her classroom. H.T. at 40; R.R. at 98.
May 6, 2002 Application for Retirement
On May 6, 2002, Decedent completed an Application for Retirement
(Form PSRS-8).4
In Section 7 of the Application for Retirement, Decedent designated
her elderly and infirm mother, Helen Lapcevic, (Mother), as Principal Beneficiary
who was to receive 100% of Decedent’s PSERS Account. Decedent nominated
two “friends,” “Friends/Appellants,” as Contingent Beneficiaries, each of whom
was to receive 50% of Decedent’s PSERS Account in the event Mother
predeceased Decedent. June 7, 2002, Application for Retirement, at 5; R.R. at 166.
The record reflects that the “Principal Beneficiary(ies)” and
“Contingent Beneficiary(ies)” Sections of the Application for Retirement were
4
The record reveals that a portion of the handwriting on the Application for Retirement
was Gallman’s. From this fact, it may easily be inferred that Gallman assisted Decedent in
completing the Application for Retirement. Gallman never testified otherwise.
Decedent withdrew her total contribution and interest in one installment and requested
that PSERS directly roll over her tax free funds. June 7, 2002, Application for Retirement, at 3;
R.R. at 164. Decedent directed PSERS “to withhold federal income tax withheld from the
taxable portion of her monthly payment” based on zero allowances and her single marital status.
June 7, 2002, Application for Retirement, at 4; R.R. at 165.
4
completed by Decedent in her own handwriting and that the percentage under each
category of beneficiary was correct in that they each added up to 100%.
PSERS received Decedent’s Application for Retirement on June 7,
2002.
Decedent’s Mother died on July 15, 2002.
August 2, 2002 Nomination of Beneficiaries Form
Three months after the Application for Retirement was submitted and
two weeks after Decedent’s Mother died, PSERS received a Nomination of
Beneficiaries Form (Form PSERS-187) dated August 2, 2002, (hereinafter “August
2002 Nomination of Benefits Form”).
The Principal Beneficiary was changed to “Willette B. Gallman.”
The August 2002 Nomination of Benefits Form purported to give
Gallman, as the new Principal Beneficiary, 50% of Decedent’s PSERS Account.
Friends/Appellants were again listed as Contingent Beneficiaries; but on this Form,
they each were to receive 25% of Decedent’s PSERS Account. August 2002
Nomination of Benefits Form, at 1; R.R. at 173.5
5
It is undisputed that the only sections filled out by Decedent on this particular Form
were: (1) her signature; (2) her social security number; and (3) the date. All other sections on
this Form were evidently completed by Gallman.
On the Form, if a member wished for the beneficiary to remain confidential, he/she was
to “Check [box] here if you do not want your beneficiary to appear on your annual Statement of
Account.”
5
The Principal Beneficiary(ies) and Contingent Beneficiary(ies)
sections of the August 2002 Nomination of Benefits Form were filled in by
Gallman, not the Decedent. Unlike the percentages for each class of beneficiary in
the Application for Retirement, which were filled-in accurately by Decedent just
three months earlier, the percentages in the August 2002 Nomination of
Beneficiaries Form did not add up to 100%.
By letter dated October 19, 2002, PSERS rejected and returned the
August 2002 Nomination of Beneficiaries Form because the percentages for each
class of beneficiary did not add up to 100%. Letter from PSERS to Sandra
Lapcevic, October 19, 2002, at 1; R.R. at 174.
October 2002 Modified Nomination of Beneficiaries Form
On October 29, 2002, PSERS received the same August 2002
Nomination of Beneficiaries Form, but with “corrections” made to the percentages
next to the named beneficiaries (hereinafter “October 2002 Modified Nomination
of Beneficiaries Form”). Specifically, “Wite-Out” was used and the percentage
next to the Principal Beneficiary, Willette Gallman, was changed from 50% to
100%. The percentage next to each Contingent Beneficiary, Karen Snizaski and
Christine Vilsack was changed from 25% to 50%.
PSERS accepted the October 2002 Modified Nomination of
Beneficiaries Form and indicated that the form was “received and processed.”
Letter from PSERS to Sandra Lapcevic, December 27, 2002, at 1; R.R. at 176.
At some point in the four months between the time Decedent signed
the October 2002 Modified Nomination of Beneficiaries Form and March 6, 2003,
6
arrangements were made to have Gallman’s nephew, Zinford Mitchell (Attorney
Mitchell), prepare a Power of Attorney and Last Will and Testament for Decedent.
On March 6, 2003, Gallman accompanied Decedent to Attorney
Mitchell’s office where Decedent signed a Power of Attorney which named
Gallman as her “Attorney-in-Fact.” The Power of Attorney gave Gallman
immediate and complete control over Decedent’s personal and financial affairs.
The Power of Attorney named Gallman’s relative, Shirley Marie Gallman-Posey,
as “Attorney-in-Fact” if Gallman predeceased Decedent.
On that same date, Decedent executed her Last Will and Testament
which named Gallman the sole beneficiary of Decedent’s entire estate. The Last
Will and Testament, again, named Gallman’s relative, Shirley Marie Gallman-
Posey, as sole beneficiary if Gallman predeceased Decedent.
The Power of Attorney and Last Will and Testament were notarized by
Doreen Mitchell.6
In early August 2004, Decedent was rushed to the hospital “for blood
loss via her rectum.” Telephone Deposition of Ronald Stiller, M.D. (Dr. Stiller
Deposition), August 23, 2004, at 4; R.R. at 23. Her treating physician, Ronald
Stiller, M.D. (Dr. Stiller) testified that Decedent required an “emergency guardian”
because she needed life-saving surgery. The medical records indicate that
Decedent had a history of depression. She was admitted with a gastrointestinal
6
It is unclear from the record if Doreen Mitchell is related to Gallman’s nephew,
Attorney Mitchell.
7
bleed, severe malnutrition, and possible intestinal perforation, and she was
delirious, in renal failure, and had mouth sores. UPMC Shady Side Hospital
Records, August 8, 2004; R.R. at 26-28. A psychiatric evaluation performed by
Kurt Ackerman, M.D. (Dr. Ackerman) concluded that Decedent was unable to
make decisions. His notes also indicate there were “allegations of possible neglect
or abuse which warrant an independent guardian.” UPMC Shady Side Hospital
Records, August 8, 2004; R.R. at 26.
On October 18, 2004, Decedent was adjudicated a totally
incapacitated person by the Court of Common Pleas of Allegheny County. The
Court appointed Diane Spivak (Guardian), a social worker, to serve as Decedent’s
permanent plenary guardian.
Decedent was moved to a personal care home. Gallman was barred
from visiting Decedent. H.T. at 67; R.R. at 125.
2004 Nomination of Beneficiaries Form
On December 9, 2004, Guardian submitted a Nomination of
Beneficiaries Form (hereinafter “2004 Nomination of Beneficiaries Form”).
Decedent’s niece and nephew, Laura and Joseph Lapcevic, were named as
Principal Beneficiaries.
Decedent died on February 11, 2006, leaving $688,514 in her PSERS
Account. Stipulation of Fact No. 5, September 12, 2007.
8
Following Decedent’s death, the 2004 Beneficiaries (Laura and
Joseph Lapcevic) and Gallman made separate demands upon PSERS for payment
of the death benefits.
PSERS took the position that the 2004 Nomination of Beneficiaries
Form filed by Decedent’s Guardian was valid. Gallman appealed and challenged
the validity of the 2004 Nomination of Beneficiaries Form on the ground that the
Guardian did not have authority to change a beneficiary without petitioning the
court. Friends/Appellants intervened.
The Board stayed all proceedings and directed the parties to proceed
in the Court of Common Pleas of Allegheny County, Orphans’ Court Division, to
determine if the Guardian lacked authority.
On June 28, 2007, the Allegheny County Court of Common Pleas,
Orphans’ Court Division, ruled that the Guardian lacked authority to submit the
December 2004 Nomination of Beneficiary Form to PSERS.
The Board granted Gallman’s request to set aside the 2004
Nomination of Beneficiaries Form.
In subsequent correspondence PSERS informed Gallman that the
August 2002 Nomination of Beneficiaries Form was invalid because the
percentages did not add up to 100%. In addition, PSERS believed the October
2002 Modified Nomination of Beneficiaries Form was invalid because “Wite-Out”
was used to change the percentages and it was not re-authenticated by Decedent.
PSERS concluded that Friends/Appellants, the Contingent Beneficiaries named on
9
Decedent’s Application for Retirement, to be the last validly named beneficiaries
on file with PSERS. Gallman sought reconsideration.
The Board scheduled an Administrative Hearing before a Hearing
Examiner to determine how Decedent’s PSERS death benefits should be
distributed.
Gallman’s Testimony
With respect to Decedent’s ostensible motive for making Gallman her
beneficiary, Gallman testified that every day for one year she drove Decedent to
see her Mother who was in a nursing home. H.T. at 42; R.R. at 100. Gallman
testified that she took Decedent to dinner every day.7 H.T. at 44; R.R. at 103.
Gallman also testified that she arranged to have “[Decedent’s] house redone and
also everything that needed to be done was done from keeping her, seeing that she
gets private, uh, health problems, see that her house was cleaned, and just
everything you would do in your home to keep her house because she could not do
it.” H.T. at 45; R.R. at 103. Gallman testified that she did this “until [Decedent]
got sick in 2004” and was placed in the hospital. H.T. at 45; R.R. at 103.
Over objections based on hearsay and the Dead Man’s Statute,
Gallman was permitted to testify8 with respect to how her name came to appear as
the Principal Beneficiary on the August 2002 Nomination of Benefits Form:
7
Gallman did not elaborate on who paid for the dinners.
8
The Hearing Examiner denied PSERS’ objections based on the Dead Man’s Statute
without prejudice, allowed Gallman to testify, and preserved PSERS’ objection based on the
Dead Man’s Statute so that Gallman’s cross-examination did not constitute a waiver of the
(Footnote continued on next page…)
10
Q. How is it that your handwriting appears on this
nomination of beneficiary form that is Exhibit 13?
A. Because she told me this is what she wanted me to
do.
MS. MILLS (Attorney for PSERS): Objection. Hearsay.
A. Otherwise, I couldn’t do it. (Emphasis added).
****
A. Everything on here I was directed by Ms. Lapcevic
[Decedent] because I wouldn’t have known these two
names on number 2. I wouldn’t have known any of that.
She directed me on the full form. (Emphasis added).
Q. So what you are saying, by those two names, you
mean Ms. Sinzaski’s name and Ms. Vilsack’s name?
A. That’s right.
H.T. at 50, 54; R.R. at 108, 112.9
Gallman was asked to explain why the number 50% appeared next to
her name on the August 2002 Nomination of Benefits Form:
Q. You will note that next to your name is the number
50. Were you directed by Ms. Lapcevic [Decedent] to
write that number?
(continued…)
objection, and so that the Hearing Examiner, and later the Board, could strike the testimony (in
whole or in part) if appropriate after taking the matter under advisement.
9
During her direct exam, Gallman volunteered that she would not have known the names
or social security numbers of Friends/Appellants if Decedent had not given her that information;
the obvious implication being that there was no way that Gallman could have filled-out the
August 2002 and October 2002 Forms without Decedent’s assistance and knowledge. However,
Gallman left unexplained the fact that she had previously helped Decedent complete her
Application for Retirement dated May of 2002, which contained the names and social security
numbers of Friends/Appellants Contingent Beneficiaries.
11
A. She directed me on everything, but she thought
100 percent was for the full form rather than one section
and that’s why PSERS sent her back and said – sent the
form back and said each area, A and B, had to be 100
percent each. (Emphasis added).
H.T. at 55; R.R. at 113.
With respect to the modifications to the August 2002 Nomination of
Benefits Form that were done with “Wite-Out,” Gallman testified:
A. She sat and I sat and she told me what to do. She
said this has to be 100 percent in Section A, and it has to
be 100 percent in Section B. She says put 100 percent on
A and put 50/50 on B.
Q. Was there a product known as whiteout (sic) used
on the original form?
A. She had it. She had everything right there.
Q. Did you apply the whiteout (sic) to the form?
A. Yes.
Q. At whose direction did you apply the whiteout
(sic) to the form?
A. She told me what to do.
Q. By “she,” you mean Ms. Lapcevic [Decedent]?
A. Ms. Sandra Lapcevic [Decedent].
Q. Did she direct you to, after the whiteout (sic) was
placed on the form, to write the numbers that we
currently see that are written on the form?
A. Yes.
****
Q. Did you read the form?
12
A. No, she told me what to do.
****
Q. She could have written the numbers down --
A. But she didn’t want to. She told me to do it.
****
Q. You had testified that you did not read the
instructions on the back of the beneficiary form.
A. No, she had it and she told me what to do.
H.T. at 56-58, 65, 70; R.R. at 114-116, 123, 128. (Emphasis added).
Gallman was asked whether Decedent signed the August 2002
Nomination of Beneficiary Form before or after Gallman filled in the rest of the
information.10 Gallman indicated that Decedent presented Gallman a blank form
that had already been signed by Decedent11 and she asked Gallman to fill in the rest
of the beneficiary information:
Q. Mrs. Gallman, I’m going to show you what has
been marked as Exhibit 3 and ask you have you seen that
10
The implication was that Gallman had Decedent sign and date a blank Form, which
Gallman later completed without Decedent’s knowledge.
11
Notably, Gallman later contradicted herself when she stated that Decedent signed the
August 2002 Form after Gallman completed it:
Q. After this form was completed, do you know what
happened to it?
A. She had it. I did what she wanted me to do.
Q. The question is, what happened to the form after
you completed the form?
A. The one here that says August 2, 2002?
Q. Yes.
A. She signed the form, put the date on it and she
prepared it for mail.
H.T. at 49, 55; R.R. at 107, 113 (Emphasis added).
13
form before? That’s the August 2, 2002 beneficiary
form?
A. Yes.
****
Q. Did you see her sign this document?
A. Yes, she sat [it] there in front of me blank and she
had put the social security and her signature and the date
on there.
Q. There is other handwriting on this form as well.
Whose handwriting is that?
A. That’s my handwriting.
H.T. at 49; R.R. at 107 (Emphasis added).
Gallman was asked whether she discussed Decedent’s Last Will and
Testament before it was signed. Gallman testified over objection as follows:
Q. Did you discuss with Ms. Lapcevic this document
before it was prepared and signed?
A. No, she said that - - all she said was that she
wanted to put me on her will.
H.T. at 63; R.R. at 121. (Emphasis added).
Caroline Howard, LPN (Nurse Howard), spent a great deal of time
with Decedent for four months from August of 2002 through November of 2002.
Nurse Howard testified that Decedent had a daily routine which included saving
important pieces of mail for Gallman to review when she got to her house. H.T. at
76-77; R.R. at 134-135. Nurse Howard did not testify that she saw Decedent read
any notifications from PSERS or that she saw Decedent mail the August 2002
14
Nomination of Benefits Form, or the October 2002 Modified Nomination of
Beneficiaries Form to PSERS.
No other independent or disinterested witness appeared to testify on
Gallman’s behalf.
On March 10, 2008, the Hearing Examiner issued her Report and
recommended that Decedent’s death benefits be paid to Gallman pursuant to the
October 2002 Modified Nomination of Beneficiaries Form. The Hearing Examiner
accepted Gallman’s testimony as credible and concluded, inter alia, that the
Decedent “had white out (sic) among her papers and told [Gallman] to put 100%
on A and 50/50 on B.” Hearing Officer’s Recommendation, March 10, 2008, at
13; Finding of Fact (F.O.F.) No. 55. The Hearing Examiner found that “no
evidence was proffered to show that [Gallman] had perpetrated a fraud upon
Decedent.” Hearing Officer’s Recommendation, March 10, 2008, at 10; F.O.F.
No. 33.
With regard to whether Gallman was competent to testify under the
Dead Man’s Statute,12 the Hearing Examiner concluded that the Dead Man’s
12
The Dead Man’s Statute provides, in pertinent part, as follows:
§5930. Surviving party as witness, in case of death, mental
incapacity etc.
…in any civil action or proceeding, where any party to a thing or
contract in action is dead … and his right thereto or therein has
passed, either by his own act or by the act of the law, to a party on
the record who represents his interest in the subject in controversy,
neither any surviving or remaining party to such thing or contract,
nor any other person whose interest shall be adverse to the said
right of such deceased…party, shall be a competent witness to any
(Footnote continued on next page…)
15
Statute was inapplicable because no right of the Decedent passed to a party of
record who represented the Decedent’s interests and because Gallman’s interest
was not adverse to Decedent.
Friends/Appellants filed Exceptions to the Hearing Examiner’s
Recommendation. Issue V stated: “Did the Hearing Officer inappropriately
believe it was the [Friends/Appellants’] burden to show fraud when the law
requires a finding that the retiree was free of undue influence of the Claimant
[Gallman]?” In addition, Friends/Appellants argued that the Hearing Examiner
erred by considering and crediting Gallman’s self-interested testimony relating to
statements made by Decedent prior to her death, because that testimony was barred
by the Dead Man’s Statute.
The Board adopted the Hearing Examiner’s recommendation with
some minor modifications.
With regard to whether the Hearing Examiner failed to consider
evidence of a “confidential relationship” between Gallman and Decedent, the
Board concluded that the burden was on Friends/Appellants to establish “fraud or
concealment.” The Board agreed with the Hearing Examiner that “no evidence
was presented that proved the existence of fraud.” Board Opinion, June 24, 2008,
at 4.
(continued…)
matter occurring before the death of said party….(Emphasis
added).
42 Pa.C.S. §5930.
16
With respect to whether the testimony of Gallman violated the Dead
Man’s Statute, the Board agreed with the Hearing Examiner that
Friends/Appellants did not demonstrate that an interest of the Decedent passed to a
party of record who represented the Decedent’s interests. The Board specifically
found that PSERS did not represent the interests of Decedent.
Friends/Appellants timely appealed to this Court.
As noted, this Court vacated the Board’s order on the grounds that the
2002 October Modified Nomination of Beneficiaries Form was not completed “by
the member by written designation” as required by Section 8507(e) of the
Retirement Code, 24 Pa.C.S. §8507(e). Because of this Court’s disposition of the
matter on the first issue, this Court did not address Friends/Appellants’ other
issues: whether, in light of the clear and convincing evidence of the parties’
“confidential relationship,” it was Claimant’s burden to demonstrate that Decedent
was free of “undue influence” when she signed the 2002 October Modified
Nomination of Beneficiaries Form and whether Gallman’s testimony was barred by
the Dead Man’s Statute.
The Supreme Court granted Gallman’s Petition for Allowance of
Appeal to address the sole issue of whether the October 2002 Modified Nomination
of Beneficiaries Form met the requirements of 24 Pa.C.S. §8507(e).
On May 28, 2013, the Supreme Court reversed this Court and held
that the Board’s decision was in accord with Section 8507(e) of the Retirement
Code, 24 Pa.C.S. §8507(e). The Supreme Court remanded the matter to this Court
for consideration of the remaining issues raised by Friends/Appellants.
17
I.
Was Gallman Competent to Testify
Under The Dead Man’s Statute?
Three criteria are necessary to disqualify a witness from testifying
under the Dead Man’s Statute: (1) the decedent must have had an actual right or
interest in the matter at issue; (2) the interest of the putative transferee (Gallman)
must be adverse to the interest of the decedent; and, (3) the right of the decedent
must have passed to a party of record (either Gallman, PSERS13 or
Friends/Appellants) who represents the decedent’s interests. Punxsutawney
Municipal Airport Authority, 745 A.2d 666 (Pa. Super. 2000).
The Board held that “at least the third prong has not been met”
because no right of Decedent passed to a party of record who represented
Decedent’s interests. Board Opinion, June 24, 2008, at 4.
Actually, this reasoning was incorrect because under the third prong,
Decedent’s right did, in fact, pass to Gallman. Gallman, therefore, was the party
who represented Decedent’s interests. Because her testimony was not “adverse” to
Decedent’s, she was competent as to all matters occurring during the lifetime of
Decedent. Despite the Board’s error, this Court agrees with the Board’s ultimate
conclusion that the Dead Man’s Statute did not bar Gallman’s testimony, albeit for
reasons different than those stated by the Board.
13
Clearly, PSERS did not represent Decedent’s interest. PSERS was merely the holder
of property on behalf of another but did not know to whom the property should be transferred.
In this regard, PSERS is in the same position as a stakeholder in an interpleader action.
18
First, this dispute involves an “inter vivos” transaction. In
Pennsylvania, the designation of a beneficiary of pension or retirement plan is
deemed to be an inter vivos transaction. Fiumara v. Fiumara, 427 A.2d 667 (Pa.
Super. 1981). Where the decedent has made a valid transfer of rights during her
lifetime the transferee, in effect, “represents” the decedent’s interests and stands in
the decedent's shoes and will be competent to testify. King v. Lemmer, 173 A. 176(Pa. 1934).
Where, as here, there is a challenge to the validity of an inter vivos
gift to a putative transferee, the following test is used to determine if the putative
transferee is competent to testify under the Dead Man’s Statute:
[I]f a valid inter vivos transfer can be shown by
independent evidence before the admission of any
testimony by the alleged donee (transferee), the donee
(transferee) will be considered to represent the interest of
the decedent and will be permitted to testify. Conversely,
if the alleged donee (transferee) fails to establish a prima
facie gift (transfer) by independent testimony before he
takes the stand, he will not be competent to testify.
Friedeman v. Kinnen, 305 A.2d 3, 4 (Pa. 1973) (Emphasis added).
Accordingly, Gallman was required, prior to taking the stand, to
demonstrate by prima facie evidence that the inter vivos transfer was valid.
Prior to taking the stand, Gallman introduced the October 2002
Modified Nomination of Beneficiary Form. The Supreme Court upheld the validity
of the October 2002 Modified Nomination of Beneficiary Form. In reversing this
Court, the Supreme Court concluded that Decedent filed with PSERS a valid
change of beneficiary by written designation.
19
The Supreme Court’s conclusions are controlling. Because Gallman
presented prima facie evidence of Decedent’s donative intent, Gallman represented
Decedent’s interest and was, thus, competent to testify under the Dead Man’s
Statute.14
Friends/Appellants’ first assignment of error is without merit.
II.
Did the Board Apply the Wrong Presumptions and Burden of Proof?
The Hearing Examiner found that “no evidence was proffered to show
that [Gallman] had perpetrated a fraud upon Decedent.” Hearing Officer’s
Recommendation, March 10, 2008, at 10; FOF No. 33. The Board adopted the
Hearing Examiner’s finding and concluded that:
Decedent was presumed competent to have made her
beneficiary designation, and her signed nomination of
beneficiary form is presumed to accurately express her
state of mind. See Estate of McGovern v. State
Employees’ Retirement Board, 512 Pa. 377, 517 A.2d
523 (1986). This presumption may only be overcome by
evidence that is ‘clear, precise and convincing.’ Id. The
burden of proving the existence of fraud or concealment
is upon the asserting party by evidence that is clear,
precise and convincing. If Intervenors
[Friends/Appellants] believed there was fraud, it was
their burden to prove it. Estate of Bosico, 488 Pa. 274,
412 A.2d 505 (1980). The Board agrees with the
14
Although the October 2002 Modified Nomination of Beneficiary Form constitutes
prima facie evidence that the form was completed, that Gallman’s name appeared as Principal
Beneficiary, and it was signed by Decedent, it does not establish the circumstances under which
the alleged transfer was made, viz., whether it was authorized by Decedent with Decedent’s
consent and without undue influence. This will be dealt with in the next issue.
20
Hearing Examiner that no evidence was presented that
proved the existence of fraud.
Board Opinion, June 24, 2008, at 4 (Emphasis added).
Friends/Appellants contend that the Board applied the wrong
presumptions, and legal analysis and misplaced the burdens of proof. First, they
assert that the Board failed to recognize that there was a “confidential relationship”
between Gallman and Decedent. They argue that there was “clear, precise and
convincing” evidence of a “confidential relationship;” therefore, the burden shifted
back to Gallman to show the absence of any taint of “undue influence.”
This Court finds Friends/Appellants are correct. As discussed
previously, if it can be established by prima facie evidence that an inter vivos
transfer took place, a presumption of validity arises and the burden shifts to the
contestant (Friends/Appellants) to rebut this presumption by clear, precise and
convincing evidence. The presumption of validity may be rebutted by establishing
that the transferor and transferee had a “confidential relationship” at the time the
alleged transfer was made.
Critically, clear and convincing evidence that a confidential or
fiduciary relationship exists between a donor and donee or testator and beneficiary
raises a presumption that the gift or bequest was the product of undue influence.
Banko v. Malanecki, 451 A.2d 1008 (Pa. 1982) (if confidential relationship at time
of gift is shown, burden shifts to donee to show absence of taint of undue
influence); Frowen v. Blank, 425 A.2d 412 (Pa. 1981) (if confidential relationship
exists, the law presumes transactions are voidable); Estate of Reichel, 400 A.2d
1268 (Pa. 1979); In re Fickert's Estate, 337 A.2d 592 (Pa. 1975); In re Bosley, 26
21
A.3d 1104 (Pa. Super. 2011); In re Estate of Luongo, 823 A.2d 942 (Pa. Super.
2003); Estate of Lakatosh, 656 A.2d 1378 (Pa. Super. 1995); In re Estate of
Meyers, 642 A.2d 525 (Pa. Super. 1994).
Here, the Board correctly stated the “general rule” that a party seeking
to avoid or undo a contract on the basis of fraud bears the burden of proving fraud.
This “general rule,” however, presupposes contracting parties legally free to deal at
arm's length. Young v. Kaye, 279 A.2d 759, 763 (Pa. 1971). When there is
evidence of a “confidential relationship” the parties are bound by a much higher
duty.
The Supreme Court has explained that where a “confidential
relationship” exists, the “general rule” (applied by the Board) which requires an
affirmative showing of fraud, does not apply:
When the relationship between persons is one of trust and
confidence, the party in whom the trust and confidence
are reposed must act with scrupulous fairness and good
faith in his dealings with the other and refrain from using
his position to the other's detriment and his own
advantage. McCown v. Fraser, 327 Pa. 561, 192 A. 674(1937); Null's Estate, 302 Pa. 64, 153 A. 137 (1930) ...
This well settled doctrine, founded on strong
considerations of public policy, renders inapplicable the
general rule requiring an affirmative showing of fraud.
Young, 279 A.2d at 763 (citations omitted) (Emphasis added).
“Once a fiduciary or confidential relationship is shown to exist, the
burden is shifted to the person who is in such relationship, ... to prove the absence
of fraud, and that the transaction was fair and equitable.” Ruggeri v. West Forum
Corp., 282 A.2d 304, 307 (Pa. 1971) (Emphasis added). See also Thomas v.
22
Seaman, 304 A.2d 134 (Pa. 1973); Shaffer v. Shaffer, 23 A.2d 883 (Pa. 1942). To
this end, “[s]uch a transaction will be condemned, even in the absence of evidence
of actual fraud, or of mental incapacity on the part of the donor, unless there is full
and satisfactory proof that it was the free and intelligent act of the donor, fully
explained to him, and done with a knowledge of its consequences.” Lochinger v.
Hanlon, 33 A.2d 1, 4 (Pa. 1943) (Emphasis added).
Friends/Appellants assert that the Board failed to recognize the
“confidential relationship” between Gallman and Decedent. They have
consistently argued that Gallman purposefully interjected herself into Decedent’s
life at or around the time Decedent was vulnerable and making important financial
decisions. Friends/Appellants contend that there was “clear and convincing
evidence” of a “confidential relationship” between Gallman and Decedent.
Therefore, a presumption arose that the designation of Gallman as Principal
Beneficiary of Decedent’s PSERS Account was the product of “undue influence.”
III.
Did the Board Fail to Recognize the Confidential
Relationship between Gallman and Decedent?
“It is impossible to define precisely what constitutes a confidential
relationship.” Young, 279 A.2d at 763. A “confidential relationship” exists
whenever “one person has reposed a special confidence in another to the extent
that the parties do not deal with each other on equal terms, either because of an
over-mastering dominance on one side, or weakness, dependence or justifiable
trust, on the other.” Truver v. Kennedy, 229 A.2d 468 (Pa. 1967) (Emphasis
added). The typical case of “confidential relationship” in Pennsylvania has
resulted from personal contact between two individuals, as the result of which one
23
secures an advantage over the other, often by way of friendship. See In Re Estate
of Button, 328 A.2d 480 (Pa. 1974) (“confidential relationship” found between an
infirm and sickly man and the woman in whose house he resided); Young,
(“confidential relationship” existed between an octogenarian and tax consultant
since former had no knowledge of tax laws and was dependent upon consultant's
advice); McCown v. Fraser, 192 A. 674 (Pa. 1937) (“confidential relationship”
found between a woman and a man she “adopted” who was sixty-five years her
junior).
In Fiumara v. Fiumara, 427 A.2d 667 (Pa. Super. 1981), John J.
Fiumara (the decedent), was a member of the Iron Workers Pension Plan of
Western Pennsylvania and as such, was entitled to participate in that plan's welfare
and pension benefits. On January 5, 1970, the decedent changed the beneficiary
designation from his estranged wife to his two minor children.
In April or May of 1972, the decedent learned he had terminal cancer.
The decedent was unable to care for himself and thus moved in with Carolyn Kelly
(Kelly), a sister, with whom he had previously been estranged. Later that month an
attorney visited the Kelly residence to consult with decedent about his estate.
Although the Pension Plan's benefits were never discussed, a Will was drafted at
that time making Kelly the sole heir and executrix of the decedent's estate.
Afterwards, decedent's physical condition deteriorated. He received medication for
pain, was given radiation and chemotherapy, suffered severe weight loss and
became confined to the area where he slept. By the time of his death he was
entirely dependent on Kelly for all the necessities of life.
24
A change of beneficiary form, dated March 14, 1973, was signed by
decedent and completed by Kelly, who designated herself sole beneficiary of
decedent's welfare and pension benefits. Decedent died on March 26, 1973.
The Superior Court concluded that a confidential relationship existed
between Kelly and decedent. Decedent was physically debilitated and taking pain
medication at the time of the beneficiary designations. He was confined to bed and
dependent upon Kelly for all the necessities of life. In addition, the beneficiary
designations were completed by Kelly rather than by decedent. The Superior Court
held that these facts were more than sufficient to establish the existence of a
confidential relationship between decedent and Kelly.
In Foster v. Schmitt, 239 A.2d 471 (Pa. 1968), a confidential
relationship was established where the alleged donee was a “constant companion”
of the decedent for 47 years, from 1918 until six months before decedent’s death
on January 18, 1965. The donee “administered practically all of [decedent’s]
personal and business affairs during the waning years” of decedent’s life. Foster,
239 A.2d at 474.
In addition, the alleged donee possessed a “power of attorney” over
the decedent's assets. As Justice Roberts stated: “[I]f there be any clearer indicia of
a confidential relationship than the giving by one person to another of a power of
attorney over the former's entire life savings, this Court has yet to see such
indicia.” Foster, 239 A.2d at 474.
Here, the record contains evidence of Decedent’s deteriorated
physical condition, her helplessness, and total dependence upon Gallman.
25
Decedent lived alone. Her Mother was extremely ill. Decedent was unable to
drive and relied on Gallman to take her to visit her ailing mother. Decedent had
Parkinson’s disease and walked with a cane. Decedent experienced tremors or
shaking which affected her dexterity. According to Gallman, Decedent did not
complete the October 2002 Modified Nomination of Beneficiary Form because of
it:
Q. I think you testified that Ms. Lapcevic [Decedent] wrote her
signature, the date and her social security number on these forms.
A. She wrote the date. I wrote this figure over here, the area code
and the phone number.
Q. So she was able to do all of those things herself?
A. Yes.
Q. Can you tell me why she wasn’t then able to white out numbers
if she wanted numbers whited out?
A. She might have been shaking.
H.T. at 64; R.R. at 122.
There was evidence that Decedent’s physical condition had worsened
to the point where she could not perform daily chores; she could not take care of
her home, do her own laundry or fill out forms. It was necessary to have
Decedent’s home specially renovated to make it accessible and livable. Gallman
described Decedent as “desperate” around the time when Gallman was made
Principal Beneficiary of Decedent’s PSERS Account. H.T. at 45; R.R. at 103.
Even before this Court, Gallman admits in her Brief that Decedent had a “massive
physical disability.” Gallman’s Brief at 9.
26
The Application for Retirement required Decedent to make decisions
that had tax implications. At the time the October 2002 Modified Nomination of
Beneficiary Form was completed, Decedent relied on Gallman for tax advice.
Decedent saved important mail for Gallman to review. Decedent permitted
Gallman to spend her money by hiring contractors to renovate her home and to hire
a nurse. Decedent executed a Power of Attorney which named Gallman as her
Attorney-in-Fact.15
Gallman counters by arguing that there was no evidence that Decedent
was “incompetent” or suffered from a “weakened intellect;” therefore,
Friends/Appellants did not meet the elements required to shift the burden.
Gallman relies on In re Estate of Angle, 777 A.2d 114 (Pa. Super. 2001), which set
forth the undue influence test in a will contest: (1) there was a “confidential
relationship” between the proponent and testator; (2) the proponent receives a
substantial benefit under the will; and (3) the testator had a weakened intellect.
However, Gallman misconstrues the law. In cases involving inter
vivos transactions, it is unnecessary to demonstrate that the decedent was
“incompetent.” Such a transaction will be condemned, even in the absence of
evidence of actual fraud, or of mental incapacity on the part of the donor, unless
there is full and satisfactory proof that it was the free and intelligent act of the
15
Gallman argues that the Power of Attorney was executed on March 6, 2003, “five
months” after the October 2002 Modified Nomination of Beneficiary Form was filled-out;
therefore, it was “too remote in time” to be relevant. Actually, it was just over four months
between the time the October 2002 Modified Nomination of Beneficiary Form was completed
and the Power of Attorney was executed. Certainly, it was executed at a time that was not too
remote to be relevant to a determination of whether there was a “confidential relationship” at the
time of the beneficiary designations.
27
donor, fully explained to him, and done with knowledge of its consequences.
McCown, 192 A. at 676-677. See also Fiumara (standard which applies to
testamentary transactions is not applicable to the instant transaction since in
Pennsylvania the designation of a beneficiary of a pension plan is deemed to be an
inter vivos transaction).
This important controversy concerns a substantial amount of money.
Again, Friends/Appellants contended that Gallman either designated herself as
Principal Beneficiary without Decedent’s knowledge or consent or unduly
influenced Decedent to name her as Principal Beneficiary.
This Court holds that sufficient evidence exists in the record from
which a fact-finder could conclude that there was a “confidential relationship”
between Gallman and Decedent when Decedent signed the August 2002 and
October 2002 Nomination of Beneficiary Forms.
It was incumbent upon the Hearing Examiner and Board to consider
whether there was a “confidential relationship” between the parties. However, in
the opinion of the Board there is no discussion of this issue and no findings of fact.
Instead, the Board perfunctorily accepted Gallman’s testimony that Decedent “told
her” what to write on the nomination of beneficiary forms. Consequently, it is
impossible for this Court to decide at this juncture whether Friends/Appellants
made out a prima facie case on the issue of “confidential relationship” based on
evidence found credible and competent by the Board.
Based on the foregoing, the order of the Board is vacated. The matter
is remanded to the Board to remand to the Hearing Examiner for recommended
28
findings of fact and conclusions of law on the issue of “confidential relationship.”
If it is determined that a “confidential relationship” existed between Gallman and
Decedent, Gallman shall be given the opportunity to demonstrate by clear, precise
and convincing evidence that the transaction was free of any taint of undue
influence or deception and that it was “fair, conscientious, and beyond the reach of
suspicion.” Leedom v. Palmer, 117 A. 410, 411 (Pa. 1922). See also Estate of
Clark, 359 A.2d 777 (Pa. 1976).
The matter is remanded to the Board to appoint a Hearing Examiner to
conduct an evidentiary hearing and to render a decision in accordance with this
opinion.
Jurisdiction is relinquished.
____________________________
BERNARD L. McGINLEY, Judge
29
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Karen E. Snizaski and :
Christine M. Vilsack, :
Petitioners :
:
v. :
:
Public School Employees' :
Retirement Board, : No. 1329 C.D. 2008
Respondent :
ORDER
AND NOW, this 13th day of August, 2014, the order of the Public
School Employees’ Retirement Board is hereby VACATED. The matter is
remanded to the Board to remand to the Hearing Examiner to make findings of fact
and conclusions of law on the issue of “confidential relationship.” The parties
shall be allowed to submit Briefs and proposed findings of fact and conclusions of
law. If it is determined that a “confidential relationship” existed between the
Decedent, Sandra Lapcevic, the Claimant, Willette Gallman, shall be given the
opportunity to demonstrate by clear, precise and convincing evidence that the
transaction was free of any taint of undue influence or deception and that it was
fair, conscientious, and beyond the reach of suspicion. The Board shall render a
decision in accordance with this opinion.
Jurisdiction is relinquished.
____________________________
BERNARD L. McGINLEY, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Karen E. Snizaski and Christine M. :
Vilsack, :
Petitioners :
: No. 1329 C.D. 2008
v. :
: Submitted: April 24, 2014
Public School Employees’ :
Retirement Board, :
Respondent :
BEFORE: HONORABLE DAN PELLEGRINI, President Judge
HONORABLE BERNARD L. McGINLEY, Judge (P.)
HONORABLE PATRICIA A. McCULLOUGH, Judge
OPINION NOT REPORTED
CONCURRING/DISSENTING OPINION
BY JUDGE McCULLOUGH FILED: August 13, 2014
This case returns to us following the Supreme Court’s disposition in
Snizaski v. Employees’ Retirement Board, 69 A.3d 170 (Pa. 2013), in which the
court upheld a determination by the Public School Employees’ Retirement Board
(Board) that the Nomination of Beneficiary Form received by the Public School
Employees’ Retirement System (PSERS) on August 2, 2002, naming Willette
Gallman (Gallman) as the primary beneficiary of Sandra N. Lapcevic’s (Decedent)
death benefit, was valid under section 8507(e) of the Public School Employees’
Retirement Code, 24 Pa.C.S. §8507(e). The court vacated our contrary decision
and remanded the matter for this Court’s consideration of any outstanding issues
raised and preserved by petitioners Karen E. Snisaski and Christine M. Vilsack
(Appellants) in their appeal from the Board’s decision.
I concur with the Majority’s decision that Gallman was competent to
testify under the Dead Man’s Statute, 42 Pa.C.S. §5930.
However, I respectfully disagree with the Majority’s conclusion that
the Board’s order must be vacated and the case remanded in order for the Hearing
Examiner to make additional findings of fact and conclusions of law as to whether
a confidential relationship existed between Gallman and Decedent. In my view,
the Majority’s opinion disregards the substance of the Hearing Examiner’s
decision, which explicitly considers the relationship between Gallman and
Decedent, (Hearing Examiner’s decision at 23-25, Reproduced Record (R.R.) at
210-12), and then concludes that, “under these circumstances,” Decedent’s
decision to nominate Gallman as her principal beneficiary after Decedent’s mother
died was “not unreasonable.”1 (R.R. at 212.) Indeed, the Hearing Examiner
specifically noted the importance of considering factors other than the disputed
document in reaching a disposition and particularly cited “the facts and
circumstances surrounding the completion of the [form] as well as the relationship
between the Decedent and [Gallman] during the relevant time period . . . .” (R.R.
at 210.) Contrary to the Majority’s disposition of this appeal, I would address
1
I recognize that the burden applicable to testamentary transactions does not apply to
inter vivos transactions, such that, in this case, an affirmative showing of fraud is not required to
shift the burden of proof to Gallman. Fiumara v. Fiumara, 427 A.2d 667, 671-72 (Pa. Super.
1981). However, in light of Appellants’ repeated assertions of a confidential relationship,
although the decisions of the Hearing Examiner and the Board reflect no evidence of fraud, the
Hearing Officer’s specific examination of the relationship between Gallman and Decedent and
express conclusion that the decision to nominate Gallman was “not unreasonable” clearly reflects
that neither the Hearing Officer nor the Board was persuaded that a confidential relationship was
demonstrated by the evidence.
PAM - 2
Appellants’ remaining contentions based on the existing record, and I would note
that the Hearing Examiner’s findings are supported by Gallman’s credible and
unrebutted testimony.
The relevant facts as summarized by the Supreme Court in Snizaski
include the following.2 On June 11, 2002, Decedent retired at age 57 from her
position as a public school teacher with the Penn Hills School District. On May 6,
2002, Decedent, who had never married and had no children, submitted an
application for retirement to PSERS designating her mother as the primary
beneficiary of her pension death benefit and two friends, Appellants, as contingent
beneficiaries, who each would receive 50% of the death benefit if Decedent’s
mother predeceased Decedent.
On July 15, 2002, a little more than a month after Decedent retired,
her mother passed away. On August 2, 2002, PSERS received a second
nomination form designating Gallman as the primary beneficiary of Decedent’s
death benefit. Gallman had met Decedent about thirty years earlier when she
began preparing Decedent’s tax returns.3 Beginning in 2001, after Decedent was
diagnosed with Parkinson’s disease, Gallman drove Decedent on a daily basis for
more than a year so that Decedent could visit her mother.4 Decedent was still
2
Snizaski v. Employees’ Retirement Board, 69 A.3d 170, 172 & n.3 (Pa. 2013).
3
For the first ten years, Gallman prepared Decedent’s taxes while she was employed with
H&R Block. Subsequently, Gallman had her own business in the East Hills Shopping Center
and then worked from an office situated within her floral business, Gallman’s Flower Shop.
(R.R. at 97.) Decedent usually visited Gallman several times each year, for tax returns, other
questions, or “talk in general.” (R.R. at 96-97.)
4
The Majority states that, in 2001, “Gallman learned that Decedent, who lived alone, had
Parkinson’s disease.” (Majority op. at 4.) The Majority neglects to mention that Gallman
learned of Decedent’s medical challenges when Decedent, who by then was walking with a cane,
came to visit Gallman at her office. (Finding of Fact No. 41) (not altered by the Board).
PAM - 3
working during this period, which began approximately 12 months prior to her
retirement. During that period of time and until Decedent was hospitalized in
2004, Gallman helped Decedent with household chores, home renovations, and
important paperwork, apparently without receiving any compensation for her
services.
The second nomination form received by PSERS was signed and
dated by Decedent on July 29, 2002,5 (Hearing Examiner’s Finding of Fact No. 9),
incorrectly reflected a 50% distribution to Gallman as primary beneficiary and a
25% distribution to each of the two contingent beneficiaries. In October 2002,
PSERS returned the nomination form explaining that the percentages must total
100% in each section. Using “Wite-out,” Gallman altered the form and inserted
the proper distribution percentage for each class of beneficiary. Decedent did not
initial the changes or resign the form, which was received by PSERS on October
29, 2002. By letter dated December 27, 2002, PSERS notified Decedent that the
nomination form had been received and processed. The letter advised Decedent
that if she desired to make any future change to her beneficiary nominations, she
must obtain, complete, and forward a new nomination of beneficiary form.
5
Gallman testified that Decedent wrote her social security number and signed and dated
the nomination form and that Gallman wrote the rest of the information on the form herself at
Decedent’s direction. (R.R. at 107-08.) The Majority’s statement that “all other sections on this
Form were evidently completed by Gallman,” (Majority op. at 5 n.5), disregards Gallman’s
acknowledgement of these facts.
Further, despite Gallman’s forthcoming testimony, the Majority examines the
handwriting on Decedent’s application for retirement, determines that a portion of the
handwriting was Gallman’s, infers that Gallman assisted Decedent in completing the application,
and adds that “Gallman never testified otherwise.” (Majority op. at 4 n.4.) A peculiar
observation, considering that Gallman was never asked.
PAM - 4
(Hearing Examiner’s Finding of Fact No. 14.) Decedent made no further
beneficiary changes.
Decedent’s mental and physical condition began to deteriorate in
2004,6 Snizaski, 69 A.3d at 173, and she was hospitalized for various physical
infirmities. On October 18, 2004, Decedent was adjudicated a totally incapacitated
person in the county court of common pleas, and the trial court appointed social
worker Dianne Spivak to serve as Decedent’s permanent plenary guardian.
Subsequently, PSERS received a new nomination of benefits form signed by
Spivak and naming Appellants and Laura Lapcevic and Joseph Lapcevic as the
primary beneficiaries of Decedent’s death benefit.
Decedent died on February 11, 2006. Gallman successfully
challenged PSERS’ determination that Appellants and Laura and Joseph Lapcevic
were the primary beneficiaries of Decedent’s account; ultimately, common pleas
court held that Spivak lacked legal authority to change beneficiaries and that the
nomination form she submitted was a nullity. The Board then set aside the third
nomination form and ordered an administrative hearing to determine whether the
death benefit should be distributed in accordance with the first nomination form or
the second nomination form, which named Gallman as sole primary beneficiary.
Evidence was presented regarding PSERS guidelines as well as
Gallman’s role with respect to second nomination form. Gallman testified about
6
Gallman testified that, in March 2003, Decedent executed a document granting Gallman
a power of attorney and a will naming Gallman as beneficiary of her estate; both documents were
prepared by attorney Zinford Mitchell, a nephew of Gallman. The Hearing Examiner permitted
Appellants to solicit this information during Gallman’s testimony, but questioned its relevance
and noted that the relevant time period concerning the nomination of beneficiaries form was
2002. (R.R. at 119.)
PAM - 5
her relationship with Decedent,7 and she stated that her actions in completing and
changing the form were at Decedent’s direction.
Caroline Howard, LPN, also testified, stating that she had been hired
by Gallman and cared for Decedent daily from 10:00 a.m. to 4:30 p.m. from
August to November 2002. Howard stated that at that time, Decedent was mobile
but was having some difficulty walking. Howard said Decedent routinely sat at
her desk each morning, opened her mail, went through her papers, and made phone
calls. Howard said that if there were anything she wanted Gallman to see, “like
sale items, clothing or food items on sale or something,” she would put them in a
pile.8 (R.R. at 133-35.) Howard testified that Gallman also employed “some
agencies,” but Howard was not asked to elaborate.9
The Hearing Examiner generally found all witnesses to be credible
and relied on their testimony to formulate 57 findings of fact. After considering
the relationship between Gallman and Decedent, (Hearing Examiner’s decision at
23-25, R.R. at 210-12), the Hearing Examiner concluded that, “under these
circumstances,” Decedent’s decision to nominate Gallman as her principal
beneficiary after Decedent’s mother died was “not unreasonable.” (R.R. at 212.)
7
However, as noted by the Supreme Court, no testimony or evidence was introduced
regarding what personal connections or familial relationships existed between Decedent and
Appellants, Laura Lapcevic, Joseph Lapcevic, or Spivak. Snizaski, 69 A.3d at 173 n.5.
8
Citing this same testimony regarding sales on food or clothing, the Majority states that
Decedent saved “important pieces of mail for Gallman to review.” (Majority op. at 14.)
9
The Majority pointedly notes that “no other independent or disinterested witness
appeared to testify on Gallman’s behalf,” (Majority op. at 15), yet does not mention that
Appellants presented no testimony of their own or from any other individual who might have
been familiar with Decedent’s circumstances or her relationship with Gallman during the
relevant time.
PAM - 6
The Hearing Examiner specifically cited “the facts and circumstances surrounding
the completion of the [form] as well as the relationship between the Decedent and
[Gallman] during the relevant time period,” (R.R. at 210), and found that
Appellants had proffered no evidence of fraud. Ultimately, the Hearing Examiner
recommended that the entire death benefit be paid to Gallman.
Appellants filed exceptions, which the Board denied. Like the
Hearing Examiner, the Board expressly found that no evidence of fraud was
presented. Appellants then appealed to this Court, which held that the second
nomination form had not been completed in accordance with statutory
requirements and that PSERS should distribute the funds to Appellants in
accordance with the first nomination form. Gallman appealed, and the Supreme
Court reversed.
On remand, we now consider Appellants’ contention that the Board
erred when it failed to recognize a confidential relationship between Gallman and
Decedent. The burden of proving the existence of a confidential relationship is on
the party asserting it. Basile v. H & R Block, Inc., 52 A.3d 1202, 1210 (Pa. 2012);
Harrison v. Welsh, 147 A. 507, 509 (Pa. 1929). Again, I note that Appellants
offered no testimony relating their own observations or the personal observations
of any other individual on this issue. Appellants’ contentions depend almost
entirely on unsupported allegations and inferences, and, therefore, I would
conclude that their burden was not satisfied.
A confidential relationship “is created between two persons when it is
established that one occupies a superior position over the other; intellectually,
physically, governmentally, or morally, with the opportunity to use the superiority
to the other’s disadvantage.” Weir v. Estate of Ciao, 556 A.3d 819, 825 (Pa.
PAM - 7
1989). Stated differently, “a confidential relationship exists when the
circumstances make it certain that the parties do not deal on equal terms; where, on
the one side there is an overmastering influence, or on the other, weakness,
dependence or trust, justifiably reposed.” Id. Nonetheless, “in the absence of
actual coercion, overmastering influence does not exist in the abstract.” Basile, 52
A.3d at 1210 (emphasis added).
Furthermore,
Where [as here] undue influence and incompetency do
not appear, and the relation between the parties is not one
ordinarily known as confidential in law, the evidence to
sustain a confidential relation must be certain; it cannot
arise from suspicion or from infrequent or unrelated acts;
care must be used not to confound acts springing from
natural love and affection with confidential relations,
and, while the line of demarcation may in some cases be
narrow, nevertheless, to sustain the integrity of gifts
based on such affection in family relations, it is necessary
the distinction should exist.
In re Estate of Scott, 316 A.2d 883, 886 (Pa. 1974) (emphasis added).
Appellants present scant argument in support of their position and,
other than citations for general statements of law, present no authority applying
legal principles to similar facts. Instead, Appellants merely insist that “the record
is full of evidence” that Gallman and Decedent were in a confidential relationship,
(Appellants’ brief at 8), requiring Gallman to affirmatively prove that the change
of beneficiaries on the nomination form was not the result of undue influence.
The Majority supplies the only legal analysis relevant to whether a
confidential relationship exists. I believe that, in doing so, the Majority too briefly
summarizes both Foster v. Schmitt, 239 A.2d 471 (Pa. 1968), and Fiumara v.
PAM - 8
Fiumara, 427 A.2d 667 (Pa. Super. 1981), thereby disregarding critical facts that
undermine the Majority’s conclusions.
As described by the Supreme Court, Foster presented “still another
variation of the of-litigated theme in which the ‘devoted friend’ and her courtroom
adversary, the decedent’s relative, clash over the estate of a poor elderly lady who
lived in filth and squalor, but actually owned quite a bit of money.” Id. at 472.
The Majority notes that the appellant/alleged donee in Foster was a constant
companion of the decedent for 47 years and possessed a power of attorney over the
decedent’s account. However, the Majority does not mention all of the following
details. The decedent in Foster executed a power of attorney over an account in
favor of the appellant in 1957. In 1961, pursuant to the power of attorney, the
appellant withdrew the entire account balance and redeposited it in a new account
titled only in the appellant’s name. In 1964, the appellant withdrew the entire
amount in cash.
The decedent was hospitalized in 1964 and, as admitted by the
appellant, the decedent began to make demands on the appellant for return of the
money. The appellant claimed that she withdrew the cash and returned it to the
decedent. However, during a trial in equity, her contention was disbelieved, and
the chancellor concluded that the decedent’s niece, also her executrix and the sole
beneficiary under the decedent’s will, was entitled to have a constructive trust
impressed on the money found to have been misappropriated by the appellant for
her own use.
On appeal in Foster, the Supreme Court concluded that the matter fell
squarely within the facts and rule cited in Silver v. Silver, 219 A.2d 659 (Pa.
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1966).10 The court also noted that “if there be any clearer indicia of a confidential
relationship that the giving by one person to another of a power of attorney over
the former’s entire life savings, this Court has yet to see such indicia.” Id. at 474.
In contrast to those facts, Appellant was not Decedent’s constant
companion for 47 years but nevertheless was a person to whom Decedent turned
for help with a personal issue; Appellant did not have a power of attorney when the
second beneficiary form was submitted; Appellant did not take money and convert
it for her own use; Decedent was not elderly; and, rather than living in filth and
squalor, Decedent’s home was made more accessible and she was provided nursing
care.
The Majority also relies on Fiumara, which is similarly
distinguishable. The two appellees in that case were the decedent’s only children,
whom the decedent named as beneficiaries of his welfare and pension benefits in
1970. In 1972, the decedent’s ex-wife and eight siblings learned that he had
terminal cancer. Shortly thereafter, the pension plan received a change of
beneficiary form purporting to change the beneficiary to the decedent’s brother,
appellant Louis H. Fiumara (Fiumara). Fiumara subsequently admitted that he
signed the decedent’s name to the form while the decedent was in surgery; the trial
court found the form to be a forgery.
Later that year, the decedent was hospitalized for several weeks.
Afterwards, he was unable to care for himself and moved in with Carolyn Kelly, a
sister with whom he had previously been estranged. Later that month, an attorney
10
In Silver, the court held that a constructive trust could be imposed, even where a
transfer of property on its face was absolute, where the plaintiff could show that there existed a
confidential relationship between herself and the defendant, that the transfer was accompanied
by a promise to reconvey, and that the plaintiff relied on this promise. Foster, 239 A.2d at 474.
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visited the Kelly residence and a will was drafted making Kelly the decedent’s sole
heir and executrix of his estate. From January 1973 through March 1973, the
decedent’s physical condition deteriorated significantly; he received medication for
pain, was given radiation and chemotherapy, suffered severe weight loss, and
became confined to the area where he slept. On March 7, 1973, arrangements were
made for the decedent to be given last rites; however, on March 11, he was
recovered sufficiently to be discharged to his sister’s care. A change of beneficiary
form, dated March 14, 1973, was signed by the decedent and completed by Kelly,
who designated herself the sole beneficiary of the decedent’s welfare and pension
benefits. On March 16, 1973, another change of beneficiary was signed by the
decedent; it too had been completed by Kelly but on this form she designated
Fiumara beneficiary of the welfare benefits and retained herself as beneficiary of
the pension benefits. The decedent died March 26, 1973.
Throughout his illness, the decedent demonstrated affection and
concern for his children, who visited him frequently. He had also remained close
to his other siblings and his mother. The chancellor found no facts to explain why
the decedent would favor Kelly and Fiumara to the exclusion of those family
members, rejecting the evidence offered by Kelly and Fiumara on that issue.
The Superior Court concluded in Fiumara that the record established
a confidential relationship between Kelly and the decedent, citing in particular the
facts that the decedent was physically debilitated and under medication for pain at
the time of the March 14, 1973, and March 16, 1973 beneficiary designations; and
he was confined to bed and dependent upon Kelly, who completed the beneficiary
designations, for all the necessities of life.
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Here, Decedent initially signed a change of beneficiary form naming
Gallman primary beneficiary of her pension benefit on July 29, 2002, a few weeks
after the death of Decedent’s mother, who was previously named the primary
beneficiary of the pension. This initial change in designation occurred more than
seven months before Decedent gave Gallman power of attorney on March 6, 2003.
The Majority emphasizes that Decedent executed a power of attorney naming
Gallman as her attorney-in-fact, (Majority op. at 27 n.15), but acknowledges that
the attorney-in-fact relationship did not exist when Decedent and Gallman filled
out the beneficiary form. Pyewell’s Estate, 5 A.2d 123, 124 (Pa. 1939)
(concluding that where the decedent gave the contested gifts to the donee prior to
granting the donee power of attorney, “these facts could not establish a confidential
relation at the time of the gifts.”).
According to Howard, during the period from August to November
2002, Decedent was having difficulty walking but was mobile, and was able to
leave the house; she went to doctor’s appointments. Howard said that at home,
Decedent routinely sat at her desk each morning, opened her mail, went through
her papers, and made phone calls.11 Unlike the decedent in Fiumara, the record
here does not reflect that Decedent was physically incapacitated, taking pain
medication, confined to bed, or utterly dependent on Gallman for her life’s
necessities. Moreover, there is no suggestion that Gallman denied Decedent access
to any family members or friends with whom she had a relationship or who
inquired about her well-being.
11
In light of Decedent’s daily activities, and since Gallman did not have a power of
attorney at that time, it would be reasonable to infer that Decedent signed the checks that paid for
the modifications to her home and for her nursing and any other expenses.
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Appellants cite no case involving similar facts or circumstances.
Rather than relying on legal analysis, Appellants attempt to demonstrate the
existence of a confidential relationship simply by casting all of Gallman’s acts on
behalf of Decedent, alone or in total, as evidence of an improper intent or design.
The Majority not only accepts Appellants’ characterization of the facts, but reaches
further into the record, citing Decedent’s medical condition in August 2004, - two
years after she named Gallman as primary beneficiary - and notations in hospital
records – hearsay on hearsay – for support.12 I note that the Majority’s opinion
contains factual inferences and conclusory statements separate and apart from the
findings of fact made by the Hearing Examiner suggesting that Gallman had the
motive and opportunity to take advantage of Decedent so as to compel only one
conclusion.13
12
The Majority refers to Ronald Stiller, M.D., as Decedent’s treating physician; however,
while Dr. Stiller may have “treated” Decedent during her 2004 hospitalization, these hospital
records do not support that inference and instead identify a Keith Kanel, rather than Dr. Stiller,
as Decedent’s “PCP.” (R.R. at 26-28.)
13
See, e.g., Majority op. at 8, quoting hospital records, “[the doctor’s] notes also indicate
that there were ‘allegations of possible neglect or abuse which warrant an independent
guardian.’” This reference to records dated August 8, 2004, two years after PSERS received the
nomination form listing Gallman as a beneficiary, is irrelevant, double hearsay. Although the
Hearing Examiner accepted Gallman’s unrebutted testimony as credible, the Majority
nevertheless refers to “Decedent’s ostensible motive for making Gallman her beneficiary . . . .”
In addition, the Majority references the following testimony:
[Q: Describe what you did for Decedent beginning in 2001.]
A. Well, we went to see her mother in Hospice, then we also took
her to dinner every day. Every day we went to the hospital to see
her mother.
(R.R. at 102) (emphasis added). I understand this to mean that Gallman and Decedent went to
the hospital every day, and together they took Decedent’s mother to dinner, perhaps in a hospice
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I submit that all of the facts cited by Appellants are subject to equally
reasonable, and contrary, inferences, suppositions, and conclusions. More
important, I believe that what is most notable about the record in this case is what
it does not contain, which is any evidence from Appellants in support of their
burden. Importantly, the mere “[o]pportunity for undue influence, suspicion and
conjecture, do not create or amount to proof of . . . [a] confidential relationship. . . .
opportunity is not evidence, and conjecture and suspicion do not take the place of
testimony.” In re Thompson’s Estate, 126 A.2d 740, 749 (Pa. 1956) (quotation and
citations omitted).
Ultimately, the Majority’s analysis urges the hearing examiner to
reconsider the evidence and draw an inference from the existing record – that
Gallman exerted “overmastering influence” over Decedent and/or defrauded her –
which the Hearing Examiner declined to do during his initial consideration of this
record. However, whereas I believe that the evidence of record fails to
demonstrate that a confidential relationship was present here, I am nevertheless
mindful of our scope of review and would leave those assessments of witness
credibility and evidentiary weight to the factfinder. Here, the questions presented
on appeal have already been addressed and decided below, and the Board’s
decision is supported by substantial evidence. Accordingly, I would affirm.
On these grounds, I respectfully dissent.
________________________________
PATRICIA A. McCULLOUGH, Judge
cafeteria. However, according to the Majority, “Gallman testified that she took Decedent to
dinner every day” and gratuitously adds that “Gallman did not elaborate on who paid for the
dinners.” (Majority op. at 10 and n.7.)
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