In Re: Estate of Blumberger Appeal of: Olden, J. ( 2015 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: ESTATE OF HELEN E. IN THE SUPERIOR COURT OF
BLUMBERGER, DECEASED, PENNSYLVANIA
APPEAL OF: JOAN OLDEN,
Appellant No. 2070 WDA 2014
Appeal from the Order December 15, 2014
In the Court of Common Pleas of Allegheny County
Orphans’ Court at No(s): 02-14-00386
BEFORE: SHOGAN, OTT, and STABILE, JJ.
MEMORANDUM BY SHOGAN, J.: FILED DECEMBER 23, 2015
Joan Olden (hereinafter “Appellant” or “The Executrix”), appeals from
the order entered on December 15, 2014, that, inter alia, removed her as
executrix of her mother’s estate (“the estate”). After careful review, we
affirm in part, vacate in part, and remand with instructions.
The orphans’ court set forth the relevant facts and procedural history
of this matter as follows:
This matter came before the Court on a Petition for
Removal of Executrix and a Motion to Dismiss Rule to Show
Cause Why Executrix should not be removed. A hearing was held
on the Petition and Motion on December 8, 2014. On December
15, 2014, the Court issued an Order granting the Petition for
Removal and denying the Motion to Dismiss. The Executrix filed
a Notice of Appeal and this appeal follows.
Helen E. Blumberger [(“the Decedent”)] died testate on
December 4, 2013. On January 30, 2014, the Decedent’s Will
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dated August 23, 1973 was admitted to probate and Letters
Testamentary were granted to [Appellant], who is one of the
Decedent’s three daughters. The Decedent’s other two daughters
(Bette A. [Blumberger] Saltzman and Diane J. Blumberger),
along with [Appellant], are the three residuary legatees named
in the Will.
According to the evidence presented at the hearing, the
primary asset in the estate is stock owned by the Decedent in a
closely-held corporation, known as Universal Builders Supply
Company, Inc. (UBS). The Decedent owned 52% of the stock
and the remaining 48% was owned by the three residuary
legatees, in equal shares. (N.T. 12/08/14, p. 5)
Greg Palmieri, who has been the accountant for UBS since
2006 (although his firm has been involved with the business for
many years), testified that the corporation is basically a holding
company. The assets are securities, approximately twenty
developed lots, and cash. According to Exhibit 1, the fair market
value of the assets in the corporation as of the date of death was
approximately $8,800,000. (N.T. 12/08/14, pp. 11-17) Mr.
Palmieri also testified that the Decedent and [Appellant] took
significant loans from the corporation. Specifically, [Appellant]
owed the corporation over $372,000 as of the date of death,
plus approximately $80,000 in interest. No loans were made to
Ms. Saltzman and Ms. Blumberger owed less than $400. The
Decedent executed a Promissory Note for the loans, but
[Appellant] refused to do so. (12/08/14, pp. 19-32)
Under the PEF Code [(Probate, Estates and Fiduciaries
Code, 20 Pa.C.S.A., § 101 et seq.)], the Court has the exclusive
power to remove a personal representative for stated reasons or
“when, for any other reason, the interests of the estate are likely
to be jeopardized by his continuance in office”. 20 Pa.C.S.A.
§3182. In this case, [Appellant], the Executrix, lists her
residence as New York City, although it is believed that she
actually resides most of the year in Switzerland. [Appellant] did
not appear at the hearing, so she could not be questioned about
her residence. Her failure to appear was, apparently, on the
advice of counsel, who did not seek court approval to excuse her
appearance; but rather, counsel took it upon himself to decide
that [Appellant] did not have to appear at a hearing seeking her
removal. This advice was erroneous, as it led the Court to
believe that she was not interested in the proceedings or she has
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something to hide and did not want to be subjected to
examination in open court.
In addition, as indicated above, [Appellant] owes over
$450,000 to the corporation for loans that were taken between
1998 and 2004. [Appellant] has a fiduciary responsibility to the
estate; however, she is also a serious creditor of the estate. The
Court believes that this demonstrates a conflict of interest, which
could potentially jeopardize the assets of the estate.
Orphans’ Court Opinion, 2/2/15, at unnumbered 1-3.
The orphans’ court removed Appellant as executrix of the estate,
denied Appellant’s motion to dismiss, directed the Orphans’ Court
Department of Court Records to appoint a successor administrator or
administratrix, and scheduled a status conference. Appellant filed a timely
appeal, and on appeal, Appellant raises five issues that are set forth
verbatim as follows:
I. Whether the lower court abused its discretion when it granted
the Petition for Removal of Executrix and revoked the Letters
Testamentary issued by the Allegheny County Department of
Court Records in the absence of clear and convincing evidence of
any substantial reason for removal.
II. Whether the lower court made an error of law and abused its
discretion by admitting classic hearsay as evidence for the
reason that it was not being admitted to prove the truth of the
matter asserted and then relying on said evidence to conclude
that the Appellant had a conflict of interest as a serious creditor
(sic) of the Estate.
III. Whether the lower court abused its discretion and made an
error of law by revoking Appellant’s Letters Testamentary based
on a finding of conflict of interest which could potentially
jeopardize the assets of the Estate when the record contains no
competent evidence of any conflict between the Appellant’s
personal affairs and the affairs of the Estate. or the likelihood of
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waste or mismanagement jeopardizing the assets of the Estate
or actual proof of a breach of fiduciary duty.
IV. Whether the lower court abused its discretion and made an
error of law by revoking Appellant’s Letters Testamentary
because it believed she was a resident of Switzerland and was
not interested in the proceedings when the record is void of any
evidence of either and paragraph 7.3 of the Decedent’s Last Will
and testament explicitly provides that no bond be required of
any personal representative 20 Pa.C.S.A. § 3174 (b)(1)(ii).
V. Whether the lower court abused its discretion and made an
error of law by directing the Department of Court Records
Orphans’ Court, to appoint a successor Administrator/
Administratrix within twenty (20) days in a Testate Estate.
Appellant’s Brief at 3-5 (“(sic)” in original).
In her first four issues, Appellant argues that the orphans’ court erred
in removing her as executrix. We note that “The removal of an executrix is
a matter vested in the sound discretion of the [orphans’] court, and thus we
will disturb such a determination only upon a finding of an abuse of that
discretion.” In re Estate of Mumma, 41 A.3d 41, 49 (Pa. Super. 2012).
The court has statutory authority to remove a personal
representative when, inter alia, “the interests of the estate are
likely to be jeopardized by his continuation in office.” 20
Pa.C.S.A. § 3182(5). Furthermore, the court may summarily
remove a personal representative when such action is
“necessary to protect the rights of creditors or parties in
interest.” 20 Pa.C.S.A. § 3183. Our case law has recognized that
“removal of a fiduciary is a drastic action which should be taken
only when the estate is endangered and intervention is
necessary to protect the property of the estate.” In re Estate of
Pitone, 489 Pa. 60, 68, 413 A.2d 1012, 1016 (1980) (quoting
Scientific Living, Inc. v. Hohensee, 440 Pa. 280, 295, 270
A.2d 216, 224 (1970)).
In re Estate of Westin, 874 A.2d 139, 142-143 (Pa. Super. 2005).
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Appellant first claims that there was no clear and convincing evidence
of any substantial reason for her removal. We disagree.
Sufficient reason for removal of a fiduciary has been found
when the fiduciary’s personal interest is in conflict with that of
the estate, such that the two interests cannot be served
simultaneously. In re Estate of Dobson, 490 Pa. 476, 483 n. 6,
417 A.2d 138, 142 n.6 (1980); In re Estate of Lux, 480 Pa.
256, 269-71, 389 A.2d 1053, 1059-60 (1978); In re Estate of
Rafferty, 377 Pa. 304, 305-06, 105 A.2d 147, 148 (1954). The
reasons for removal of a fiduciary must be clearly proven. Lux,
supra at 269, 389 A.2d at 1059; Scientific Living, supra at
295, 270 A.2d at 224. However, proof of a conflict of interest
can be inferred from the circumstances. See In re Estate of
Gadiparthi, 158 Pa.Cmwlth. 537, 632 A.2d 942, 946 (1993)
(ordering removal of an administrator, based on conflict of
interest, after he challenged decedent’s ownership of property
titled in decedent’s name). When a conflict of interest is
apparent from the circumstances, bad faith or fraudulent intent
on the part of the fiduciary need not be proven. Dobson, supra
at 483 n. 6, 417 A.2d at 142 n. 6 (citing In re Estate of Banes,
452 Pa. 388, 395, 305 A.2d 723, 727 (1973); In re Estate of
Noonan, 361 Pa. 26, 32-33, 63 A.2d 80, 84 (1949)).
Westin, 874 A.2d at 143.
As the orphans’ court pointed out, Appellant owed UBS, the primary
asset in the estate, more than $372,000.00, plus approximately $80,000.00
in interest. Orphans’ Court Opinion, 2/2/15, at unnumbered 2. The
orphans’ court found that “[Appellant] has a fiduciary responsibility to the
estate; however, she is also a serious creditor of the estate. The Court
believes that this demonstrates a conflict of interest, which could potentially
jeopardize the assets of the estate.” Orphans’ Court Opinion, 2/2/15, at
unnumbered 3. We agree. The unpaid debt to UBS undoubtedly places
Appellant in the position of a creditor to the largest asset of the estate. As
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Appellant’s interests as a creditor are adverse to UBS and jeopardize the
value of the estate, we discern no abuse of discretion in the orphans’ court
finding a conflict of interest and removing Appellant as executrix. Westin,
874 A.2d at 142; 20 Pa.C.S. § 3182(5).
In her second issue, Appellant argues that the orphans’ court erred by
admitting hearsay into evidence and relying on it to conclude that Appellant
had a conflict of interest. Specifically, Appellant claims that witnesses
Dorothy Kirsch and Greg Palmieri, of the accounting firm of R.D. Hoag &
Associates1 who provided accounting services to UBS, testified based on
documents prepared by other persons, and the orphans’ court permitted this
hearsay testimony and relied on it in making its decision. Appellant’s Brief
at 17-19.
“When we review a trial court ruling on admission of evidence, we
must acknowledge that decisions on admissibility are within the sound
discretion of the trial court and will not be overturned absent an abuse of
discretion or misapplication of law.” Stumpf v. Nye, 950 A.2d 1032, 1035-
1036 (Pa. Super. 2007). “An abuse of discretion is not merely an error of
judgment, but if in reaching a conclusion the law is overridden or
misapplied, or the judgment exercised is manifestly unreasonable, or the
result of partiality, prejudice, bias or ill-will, as shown by the evidence or the
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1
Mr. Palmieri testified that R.D. Hoag & Associates had performed
accounting services for UBS since as early as 1999. N.T., 12/8/14, at 11-12.
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record, discretion is abused.” Id. (quoting Geise v. Nationwide Life and
Annuity Co. of America, 939 A.2d 409, 417 (Pa. Super. 2007) (quotations
omitted)).
Hearsay is defined as an out-of-court statement offered to prove the
truth of the matter asserted. Pa.R.E. 801(c). This rule, however, is not
absolute, and there are exceptions. Records of a regularly conducted
activity is one such exception that is defined in Pa.R.E. 803(6) as follows:
Exceptions to the Rule Against Hearsay--Regardless of
Whether the Declarant Is Available as a Witness
* * *
The following are not excluded by the rule against hearsay,
regardless of whether the declarant is available as a witness:
* * *
(6) Records of a Regularly Conducted Activity. A record (which
includes a memorandum, report, or data compilation in any
form) of an act, event or condition if,
(A) the record was made at or near the time by--or
from information transmitted by--someone with
knowledge;
(B) the record was kept in the course of a regularly
conducted activity of a “business”, which term
includes business, institution, association,
profession, occupation, and calling of every kind,
whether or not conducted for profit;
(C) making the record was a regular practice of that
activity;
(D) all these conditions are shown by the testimony
of the custodian or another qualified witness, or by a
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certification that complies with Rule 902(11) or (12)
or with a statute permitting certification; and
(E) neither the source of information nor other
circumstances indicate a lack of trustworthiness.
Pa.R.E. 803(6)(A)-(E).
Here, Mr. Palmieri and Ms. Kirsch testified that in providing accounting
services to UBS, they relied on records kept in the regular course of business
to determine the debt Appellant owed to UBS. N.T., 12/8/14, at 25. These
records, which were admitted into evidence, consisted of ledgers, bank
statements, check registers, and other documents kept by R.D. Hoag &
Associates in the file it maintained for UBS. N.T., 12/8/14, at 28-33, 58-76.
Under the business records exception provided in Pa.R.E. 803(6), UBS’s
records of loans to Appellant were properly admitted as an exception to
hearsay.2 Accordingly, there was no abuse of discretion or error of law in
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2
We note that these records would also have been admissible under 42
Pa.C.S. § 6108, which provides as follows:
(a) Short title of section.--This section shall be known and
may be cited as the “Uniform Business Records as Evidence Act.”
(b) General rule.--A record of an act, condition or event shall,
insofar as relevant, be competent evidence if the custodian or
other qualified witness testifies to its identity and the mode of its
preparation, and if it was made in the regular course of business
at or near the time of the act, condition or event, and if, in the
opinion of the tribunal, the sources of information, method and
time of preparation were such as to justify its admission.
(Footnote Continued Next Page)
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the orphans’ court admission of these documents into evidence or in its
reliance on them in reaching its decision.
Next, Appellant avers that the orphans’ court abused its discretion and
made an error of law in finding a conflict of interest because the record
contains no competent evidence of any conflict between Appellant’s personal
affairs and the affairs of the estate. Appellant’s Brief at 19. We disagree.
As noted above, the testimony of Mr. Palmieri and Ms. Kirsch was
properly admitted. Their testimony revealed unpaid debt of more than
$400,000.00 from Appellant to UBS, which was the largest asset in the
estate. Because we have concluded that the aforementioned testimony was
properly admitted, we discern no error in the orphans’ court relying on said
testimony in reaching its decision. We reiterate, because Appellant’s
interests as a creditor are adverse to UBS and jeopardize the value of the
estate, there was no abuse of discretion in the orphans’ court finding a
conflict of interest and removing Appellant as executrix. Westin, 874 A.2d
at 142; 20 Pa.C.S. § 3182(5).3
_______________________
(Footnote Continued)
(c) Definition.--As used in this section “business” includes
every kind of business, profession, occupation, calling, or
operation of institutions whether carried on for profit or not.
42 Pa.C.S. § 6108.
3
Appellant’s argument on this issue, wherein she claims that there was no
demand made for repayment of the loans and no damage to the estate,
Appellant’s Brief at 23, are contradicted by the record. The record reveals
(Footnote Continued Next Page)
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In her fourth issue on appeal, Appellant argues that the orphans’ court
abused its discretion and made an error of law by removing her as executrix
because it believed she was a resident of Switzerland and was not interested
in the proceedings.4 We conclude that Appellant’s argument is misplaced.
Appellant cites no authority for the proposition that the orphans’ court
abused its discretion in concluding that Appellant’s failure to attend the
proceedings was indicative of Appellant’s lack of interest in the proceedings
or that she sought to avoid examination in open court. Orphans’ Court
Opinion, 2/2/15, at unnumbered 3. Moreover, the orphans’ court’s
consideration of Appellant’s failure to attend the hearing was not the basis
for its decision; it was merely a factor, as Appellant’s outstanding debt to
UBS was the focus of the orphans’ court decision. See id. at unnumbered 1-
3 (“[Appellant] is also a serious creditor of the estate. The Court believes
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(Footnote Continued)
Mr. Palmieri testified that the funds paid to Appellant were loans. N.T.,
12/8/14, at 19. He stated that if the funds were considered otherwise, they
would be subject to tax, IRS scrutiny as to whether there was a second class
of stock, and exposure to the IRS revoking S corporation status and placing
UBS in C corporation status with significantly greater tax liability. Id. at 20.
Mr. Palmieri also testified that Appellant was asked to sign a promissory note
memorializing the debt, and she refused. Id. at 22. Accordingly,
Appellant’s argument is specious; Appellant refused to acknowledge the
debt, the necessity to repay it, and exposed the corporation to significant
detrimental tax ramifications.
4
Appellant states that no bond was required pursuant to her mother’s will
and 20 Pa.C.S. § 3174 (b)(1)(ii). We point out that the orphans’ court did
not require Appellant to post a bond; thus, no further discussion of 20
Pa.C.S. § 3174 is necessary.
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that this demonstrates a conflict of interest, which potentially could
jeopardize the assets of the estate.”). As discussed above, the orphans’
court may remove an executrix for a conflict of interest under 20 Pa.C.S. §
3182(5), and that decision is left to the discretion of the orphans’ court.
Mumma, 41 A.3d at 49; Westin, 874 A.2d 139 at 143. We discern no
abuse of discretion and conclude that Appellant is entitled to no relief on this
issue.
Finally, Appellant argues that the orphans’ court abused its discretion
and made an error of law by directing the department of court records to
appoint a successor Administrator/Administratrix. Appellant’s Brief at 25.
Appellant avers that this was improper because it is a testate estate. Id.
After careful consideration, we agree, and we vacate and remand with
instructions.
Procedure for and effect of removal
The court on its own motion may, and on the petition of
any party in interest alleging adequate grounds for removal
shall, order the personal representative to appear and show
cause why he should not be removed, or, when necessary to
protect the rights of creditors or parties in interest, may
summarily remove him. Upon removal, the court may direct
the grant of new letters testamentary or of administration
by the register to the person entitled and may, by summary
attachment of the person or other appropriate orders, provide
for the security and delivery of the assets of the estate, together
with all books, accounts and papers relating thereto. Any
personal representative summarily removed under the provisions
of this section may apply, by petition, to have the decree of
removal vacated and to be reinstated, and, if the court shall
vacate the decree of removal and reinstate him, it shall
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thereupon make any orders which may be appropriate to
accomplish the reinstatement.
20 Pa.C.S. § 3183 (emphasis added).
In In re Estate of Andrews, 92 A.3d 1226 (Pa. Super. 2014), a
panel of this Court addressed a similar scenario where the decedent died
testate, but the orphans’ court, after removing an executrix, directed the
appointment of an administratrix. This Court held that was error. Id. at
1234.
The Andrews Court explained:
It is fundamental estate law that letters testamentary are issued
when the decedent leaves a will while letters of administration
are issued when the decedent dies intestate. An executor(rix) is
the person named in the will to act as personal representative
while an administrator(rix) is the personal representative when
the decedent died intestate. Section 3183 pertains to the
removal of a personal representative in general and, accordingly,
to the removal of either an executor(trix) or administrator(rix).
Thus, the language in that section necessarily provides that,
upon removal, the court is authorized to direct the grant of
letters testamentary or of administration, as the case may be.
This verbiage, however, does not provide authority for the
orphans’ court to disregard the strictures regarding who is
entitled to serve as the personal representative of an estate.
Under section 3155 of the Probate, Estates, and Fiduciaries
Code, the following persons are delineated as eligible to be
granted letters:
(a) Letters testamentary.—Letters testamentary
shall be granted by the register to the executor
designated in the will, whether or not he has
declined a trust under the will.
(b) Letters of administration.—Letters of
administration shall be granted by the register, in
such form as the case shall require, to one or more
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of those hereinafter mentioned and, except for good
cause, in the following order:
(1) Those entitled to the residuary estate
under the will.
(2) The surviving spouse.
(3) Those entitled under the intestate
law as the register, in his discretion, shall
judge will best administer the estate,
giving preference, however, according to
the sizes of the shares of those in this
class.
(4) The principal creditors of the
decedent at the time of his death.
(5) Other fit persons.
20 Pa.C.S. § 3155.
Andrews, 92 A.3d at 1234 (emphasis added).
Thus, because the Decedent died testate, letters testamentary must
issue. Andrews, 92 A.3d at 1234. In this regard, the Decedent’s will
provided for an executor and potential substitute executrices as follows:
ARTICLE VII
Executor
Section 7.1 Appointment. I appoint my husband, BEN A.
BLUMBERGER, Executor of this my Will. In the event of the
inability or unwillingness of my husband to serve or to continue
to serve as my Executor, I appoint as successor Executrix my
daughter, [Appellant], if she is willing and able to serve; if she is
not, I appoint my daughter, DIANE JULIA BLUMBERGER, if she is
willing and able to serve; if she is not, I appoint my daughter,
BETTE A. BLUMBERGER.
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The Decedent’s Will, 8/23/73, at 9, Article VII, Section 7.1 (Certified Record
at 2).
“Thus, the people who can serve as personal representatives are
limited to those who are designated in the will.” Andrews, 92 A.3d at
1234 (emphasis added). As noted above, the will states that if Appellant
cannot serve as executrix, the Decedent’s daughter Diane shall serve in this
capacity, and if Diane is unwilling or unable, then the Decedent’s daughter
Bette shall serve. Accordingly, because the list of potential executrices has
not been exhausted, it was error for the orphans’ court to direct the
appointment of an administrator because viable substitute executrices
remain in the Decedent’s will.
For the reasons set forth above, we affirm the orphans’ court’s
removal of Appellant as executrix of the Decedent’s estate. However, we
vacate that part of the order which directed the appointment of an
administrator or administratrix. We remand this matter to the orphans’
court for a determination as to whether Diane Blumberger is willing and able
to serve as executrix, and if she is not, the orphans’ court shall then
determine if Bette A. Blumberger Saltzman is willing and able to serve as
executrix. If neither Diane Julia Blumberger nor Bette A. Blumberger
Saltzman can serve as executrix, the orphans’ court shall then direct the
appointment of an administrator or administratrix as provided in 20 Pa.C.S.
§ 3155.
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Order affirmed in part and vacated in part. Case remanded with
instructions. Jurisdiction is relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
DATE: 12/23/2015
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