In Re: Estate of Devoe, R. ( 2017 )

J-S37035-17
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
ESTATE OF RICHARD A. DeVOE, : IN THE SUPERIOR COURT OF
Deceased, : PENNSYLVANIA
:
Appellant :
:
v. :
:
JAMES B. MOONEY : No. 1551 MDA 2016
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.: FILED JUNE 30, 2017
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-
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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.[1] The case was remanded to
[the Orphans’ Court] to address the remaining objections and
request for surcharge.
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.]
Orphans’ Court Opinion, 11/17/16, at 1-2 (footnote added).
1
See In re: Estate of DeVoe, 74 A.3d 264 (Pa. Super. 2013).
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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[?]
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[?]
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Brief for Appellants at 5.
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.
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.
In re Fiedler, 132 A.3d 1010, 1018 (Pa. Super. 2016) (citations and
quotation marks omitted).
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.”
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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
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would ordinarily exercise in the management of his or her own
affairs.” Id. at 1101-02.
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 re Estate of Westin, 874 A.2d 139, 144-45 (Pa. Super. 2005).
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
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in this regard.2
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.
2
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.
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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
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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
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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
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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.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/30/2017
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Circulated 06/06/2017 02:36 PM