In Re: Estate of Phillips, D. Appeal of: Jones, A.

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: ESTATE OF D.K. PHILLIPS, : IN THE SUPERIOR COURT OF
DECEASED : PENNSYLVANIA
:
:
APPEAL OF: ALBERTA JONES, MARY :
ANN SHAVER AND ROSE MARIE :
ROWAN :
:
: No. 1172 WDA 2017
Appeal from the Order Dated July 7, 2017
In the Court of Common Pleas of Greene County
Orphans' Court at No(s): Case No. 2015 F/F 3,
O.C. No. 9626 Term, 1925
BEFORE: OTT, J., KUNSELMAN, J., and MUSMANNO, J.
MEMORANDUM BY OTT, J.: FILED NOVEMBER 27, 2018
Alberta Jones, Mary Ann Shaver and Rose Marie Rowan (“Appellants” or
“Jones Heirs”), heirs of D.K. Phillips (“Decedent”), appeal the order dated July
7, 2017, and entered July 14, 2017, that confirmed absolutely the account in
the Estate of D.K. Phillips, Deceased (“Estate”), dismissed all objections to the
account, and ordered the distribution of estate assets to the heirs described
on Schedule A, in the amount of $1,324,640.00.1 Appellants frame one issue
for our review: “Did the [t]rial [c]ourt abuse its discretion in dismissing
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1 The orphans’ court also ordered that “cash in the amount of $980,000.00
shall be suspended and retained by the Administrator d.b.n.c.t.a. until further
Order of Court or Supplemental Decree of Distribution is entered.” Order,
7/14/2017.
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Appellants’ Objections without affording Appellants a meaningful opportunity
to present evidence and take testimony in support of said objections[.]”
Appellants’ Brief at 4. Based upon the following, we affirm.
Decedent died in 1925 and the Estate has remained opened since that
time.2 Decedent’s two sons administered the estate until the second one died
in 1965, when First National Bank of Waynesburg was appointed administrator
d.b.n.c.t.a. In the Petition for Granting Letters of Administration d.b.n.c.t.a.,
filed in 1965 by John M. Phillips on behalf of the Phillips family, the petitioner
stated his opinion that the entire Estate administration had been completed
except for ongoing duties pertaining to oil and gas interests. Since then, the
Estate has been administered by a succession of banks, with the current
administrator being PNC Bank, N.A. (PNC). At the time of the hearings, there
were 77 heirs with fractional interests, none of which have a majority
interest.3 With the passage of time, the number of heirs changes.
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2 Decedent’s Will provided at Paragraph 4:
(Fourth) I hereby make, constitute and appoint my sons William
Bently Phillips and Thomas Garfield Phillips my Executors with
power to lease and release all lands for oil and gas purposes which
may be in my possession at the time of my death and collect all
oil and gas royalties and rentals of whatsoever kind that may
accrue on said lands and make an equal distribution of same
semiannually. Said Executors to receive a commission not to
exceed three per cent for any and all monies paid over by them
and not be required to give bond for the performance of their duty.
3 Appellants each have a one two-hundredths interest.
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Litigation began on April 2, 2015, when PNC filed a First and Final
Account and Petition for Adjudication/Statement of Proposed Distribution
(“Account”). In response thereto, EQT Production Company (EQT) filed a
Petition objecting to PNC’s request for court approval of a proposed oil and
gas lease with Vantage Energy Appalachia II LLC (Vantage) on May 4, 2015.
On August 10, 2015, three heirs of the Estate, Nancy Good, Mark
Stephen McDonnell, and Samuel G. Lantz (“Good Heirs”) filed a Petition
Objecting to Personal Representative, PNC Bank’s Request For Court Approval
of a Proposed Oil and Gas Lease With Vantage, and also objected to attorney
fees paid by PNC and fiduciary fees taken by PNC.
On August 17, 2015, the orphans’ court entered an order scheduling a
hearing for November 19, 2015 on all pleadings filed of record to date.
Counsel for PNC was ordered to provide notice to all interested parties, and
did so on September 9, 2015. Meanwhile, on August 24, 2015, David Hook,
Esquire, entered his appearance for Appellants, the Jones Heirs, but did not
file any objections to the Account nor join the Good Heirs’ Petition.
On November 19, 2015, the day of the first hearing, James Ivan Phillips,
an heir, filed Objections to the First and Final Account of PNC, challenging the
attorney fees incurred by the Estate and the fiduciary fees taken by PNC, and
PNC’s failure to close the Estate in a timely fashion and avoid tax
repercussions. On January 12, 2016, another heir, Catherine Koester, filed
pro se Objections to the First and Final Account of PNC, objecting to PNC’s
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failure to file a current inventory and PNC’s failure to make timely distributions
to heirs resulting in unfavorable tax repercussions to the Estate.
The orphans’ court conducted nine evidentiary hearings between
November 19, 2015 and October 27, 2016, initially, for the purpose of
determining whether PNC should enter into an oil and gas lease with Vantage.4
At the fifth evidentiary hearing, held on March 15, 2016, the orphans’ court
judge notified the parties he had been granted authority by the President
Judge to resolve the objections to the account related to the administration of
the Estate by PNC. See N.T., 3/17/2016, at 36.
During the hearings from November 19, 2015, to August 11, 2016,
Appellants were present and participated through their counsel in cross
examining witnesses, presenting documentary evidence, and making
argument. At that time, Appellants had not yet filed objections.
On June 13, 2016, the orphans’ court entered an order scheduling oral
argument on objections filed by any party to the First and Final Account for
August 31, 2016. The order further directed that any party desiring an
evidentiary hearing on the objections must file a motion with the court. On
August 5, 2016, PNC filed a motion requesting an evidentiary hearing on the
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4 On June 4, 2015, the presiding judge, President Judge Farley Toothman,
recused himself from the case. Thereafter, Judge Gerald Solomon of the Court
of Common Pleas of Fayette County, was assigned to this case as a visiting
judge.
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objections to the First and Final Account, specifically, on the issues of attorney
fees paid by PNC and fiduciary fees paid to PNC. PNC’s motion was granted
on August 11, 2016. No other party, including Appellants, requested an
evidentiary hearing.
On August 26, 2016, Appellants filed objections to the Account.5
Therein, Appellants sought surcharges against PNC, asserting PNC “breached
its fiduciary duty” and “acted in a grossly negligent manner” in its
administration of the Estate. Objections to Account, 8/26/2016, ¶¶1-2.
Specifically, Appellants alleged:
PNC failed to properly distribute income, and PNC caused the
Estate to incur unnecessary tax liability. See ¶¶ 3-4, 18, 25-26,
28-30.
PNC failed to promptly complete administration of the Estate after
the 1965 grant of letters of administration. See ¶¶5-11.
PNC filed an incomplete Account. See ¶¶12-17, 19-21, and 27.
PNC paid unexplained fees for legal services and other services.
See ¶22-24.
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5 Appellants’ objections were filed more than 16 months after PNC filed its
Account, over 11 months after the September 9, 2015, notice of the November
19, 2015 hearing was sent to all heirs, and after seven evidentiary hearings
had already taken place. Even though the August 17, 2015 Order does not
specifically state the November 19, 2015 hearing was an audit or a hearing
on the objections filed to date by the Good Heirs and EQT, by its terms, the
Order was notice to all heirs of “the place of the hearing and the right to be
heard and further directed that the judge be provided with any pleading,
motion, petition or request filed of record.” Order, 8/17/2015. Thus, an
argument could be made that Appellants’ objections were untimely filed, but
PNC has not raised this issue.
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PNC received unreasonable administration fees. See ¶¶31 (1988-
1998) and 32 (1982-2014).
PNC did not have authority to negotiate or lease oil and gas
interests. See ¶¶33-36.
Appellants requested the PNC Account be rejected and a Master appointed to
compute the appropriate surcharge.
Subsequent to the filing of Appellants’ objections, the orphans’ court
conducted the August 31, 2016, oral argument and evidentiary hearing on the
issues of the legal fees paid by PNC and fiduciary fees taken by PNC for the
administration of the Estate. Another evidentiary hearing was held on October
27, 2016. At that hearing, the orphans’ court judge asked whether Appellants’
counsel had any other witnesses, and Appellants’ counsel answered that he
had no other witnesses. See N.T., 10/27/2016, at 3.
On October 28, 2016, the orphans’ court entered an order cancelling the
hearings scheduled for November 22, 2016 and November 29, 2016. Order,
10/28/2016. No party objected to the order or requested a further evidentiary
hearing.
On November 14, 2016, PNC filed a supplement to the First and Final
Account and a proposed decree, schedule of personalty, and schedule of
realty.6 On December 22, 2016, the Good Heirs filed objections to PNC’s
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6On December 5, 2016, a Petition to Intervene and Objection to Account and
Proposed Distribution was filed by Farley Toothman, pro se, alleging he is the
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supplemental account. On July 11, 2017, nearly eight months after PNC filed
the supplemental account and proposed decree, Appellants filed Objection
[sic] to Proposed Decree of Distribution, and a Brief in Support of Objection
to Proposed Decree of Distribution.7 Thereafter, on July 14, 2017, the
orphans’ court entered the order under appeal.8
With that history, we turn to address the single question presented to
this Court:
Did the [t]rial [c]ourt abuse its discretion in dismissing Appellants’
Objections [to the Account] without affording Appellants a
meaningful opportunity to present evidence and take testimony in
support of said objections?
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true owner of oil and gas rights on 96 acres of property that PNC claimed to
be an asset of the Estate. PNC and the Jones Heirs filed responses in
opposition to the petition to intervene. A hearing on the petition to intervene
was held on February 3, 2017. The orphans’ court granted the Petition on
July 12, 2017. However, evidentiary hearings on this issue remain pending in
the orphans’ court due to this appeal. See Order, 9/25/2017. See also Trial
Court Opinion, 1/11/2018, at 2 n.1.
7 Appellants’ objections to a PROPOSED decree of distribution is not a pleading
anticipated by the Orphans’ Court Rules. Pursuant to the Pennsylvania
Orphans’ Court Rules, effective September 1, 2016, the former practice of
filing exceptions to a Decree was discontinued and a Decree or Order
confirming an account can be directly appealed pursuant to Pennsylvania Rule
of Appellate Procedure 342(a).
8 No other heirs have filed an appeal.
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Appellants’ Brief at 4 (“Statement of Question Presented”).9 Here, Appellants
divide their discussion into three separate arguments:
[(1)] Appellants’ Due Process Right To A Meaningful Opportunity
To Present Evidence On Their Surcharge Claims Was
Violated[,]
[(2)] The Hearing Testimony Cited In The Trial Court’s Opinion
Was Limited Solely To The Lease Issue[, and]
[(3)] PNC Is Liable To The Heirs For The Maladministration Of Its
Predecessors-in-interest[.]
Id. at 16, 19, and 27.10 We address these arguments together.
The principles that guide our review are well settled:
The findings of a judge of the orphans' court division, sitting
without a jury, must be accorded the same weight and effect as
the verdict of a jury, and will not be reversed by an appellate court
in the absence of an abuse of discretion or a lack of evidentiary
support. This rule is particularly applicable to findings of fact which
are predicated upon the credibility of the witnesses, whom the
judge has had the opportunity to hear and observe, and upon the
weight given to their testimony. In reviewing the [o]rphans’
[c]ourt’s findings, our task is to ensure that the record is free from
legal error and to determine if the Orphans’ Court’s findings are
supported by competent and adequate evidence and are not
predicated upon capricious disbelief of competent and credible
evidence.
In re Estate of Bechtel, 92 A.3d 833, 837 (Pa. Super. 2014).
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9On August 15, 2017, the orphans’ court ordered Appellants to file a Pa.R.A.P.
1925(b) statement. Appellants complied by filing a concise statement on
August 30, 2017, raising 20 errors complained of on appeal.
10We remind counsel Pa.R.A.P. 2119(a) mandates “The argument section
shall be divided into as many parts as there are questions to be argued …”.
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The “fundamental requirement of due process is the opportunity to be
heard ‘at a meaningful time and in a meaningful manner.’” Mathews v.
Eldridge, 424 U.S. 319, 333 (1976). “[C]onsiderations of due process involve
common-sense reasoning and fundamental fairness. Moreover, due process
is a flexible concept incapable of exact definition, and is concerned with the
procedural safeguards demanded by each particular situation in light of the
legitimate goals of the applicable law.” In the Interest of F.C., III, 966
A.2d 1131 (Pa. Super. 2009). In addition, “a violation of procedural due
process requires a showing of prejudice before relief is granted.”
Stepanovich v. McGraw, 78 A.3d 1147, 1151 (Pa. Super. 2013).
Appellants contend their due process rights were violated when the
orphans’ court dismissed their objections without affording Appellants an
opportunity to present evidence, call witnesses, or take testimony “as to the
substantial issues raised in the Objections, which concern over fifty years of
maladministration by PNC and its predecessors-in-interest.” Appellants’ Brief
at 17.
Appellants contend the hearings held by the orphans’ court judge were
strictly limited to the issue of whether PNC had the authority to enter into an
oil and gas lease with Vantage and whether that lease was in the heirs’ best
interest. Appellants argue the judge made clear that he considered the
surcharge issue to be a separate issue that would be dealt with at a future
time, yet he dismissed all objections before that time ever came. Appellants
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assert they reasonably relied on the orphans’ court judge’s repeated
assurances that the surcharge issue would be dealt with in future proceedings
and the July 14, 2017 order “unfairly pulled the rug out from under them.”
Appellants’ Brief at 18.
The orphans’ court rejected Appellants’ claims of error, as follows:
Error #1: The Court erred in dismissing the August 25,
2016, Objections without allowing a full and fair
opportunity to present evidence related thereto.
The crux of the August 25, 2016, Objection is that PNC’s Account
should be rejected because PNC, as Administrator, failed to (1)
act in the best interest of the Beneficiaries; (2) acted in a grossly
negligent manner in its administration of the estate, and (3) failed
to properly distribute income incurring higher taxes. A review of
the record illustrates that in the nine (9) evidentiary hearings the
Court devoted to this matter, the Court heard sufficient testimony
on the issues complained of in the August 25, 2016, Objections.
In particular, the following testimony, together with other
testimony, supports the Court’s contention that it did not err as to
this issue. Carolyn Whitworth, an attorney with Tucker Arensberg,
a law firm retained by PNC for the purpose of preparing an account
and petition for adjudication, was sufficiently cross-examined by
the Jones Heirs on the controversy of only one account being filed
in the time frame of 1965 to 2015. N.T. 11/19/2015, at 21-23.
Whitworth further testified regarding PNC’s understanding as to
its responsibilities in paying taxes, collecting royalties, and making
distributions pursuant to the 1965 Agreement between the then
Administrator and the heirs of the estate. N.T. 11/19/2015, at 34-
36.
Donald Gavett, Vice-President and Trust Advisor at PNC, testified
regarding the various duties and services rendered by PNC on the
behalf of the heirs. Some of these duties and services included
lease negotiation, collection and distribution of royalties, and
identification of all estate heirs. N.T. 11/19/2015, at 39-44.
Further, Gavett was extensively cross-examined by the Jones
Heirs on whether PNC weighed all risks and factors in its decision
to forego distribution and instead enter into another lease. N.T.
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11/19/2015, at 98-104. He was also extensively cross-examined
by the Jones Heirs on PNC’s fiduciary obligations concerning the
oil and gas interests held by the estate. N.T. 11/19/2015, 107-
110.
It is also important to note that the Court allowed the Jones Heirs
to argue their Objections. N.T. 8/31/2016, at 89-117.
This testimony, as well as the opportunity afforded the Jones Heirs
to argue their objections, clearly established that the Jones Heirs
were provided a full and fair opportunity to present evidence
related to this alleged error and enabled this Court to render its
final ruling on the merits in the July 7, 2017, Court Order. Thus,
this alleged error is without merit and should be denied.
Error #2: The Court erred in dismissing the Objections in
their entirety while limiting testimony to the issues
whether PNC had the authority to enter a lease with
Vantage and whether the lease was in the heirs’ best
interest.
While, at the outset of this matter, the Court did state on the
record that the Court’s inquiry would be limited to those sole
issues, it was a statement made within the confines of the Court’s
authority at that specific time. However, the Court’s authority to
settle the entire estate was later granted by the President Judge
and was communicated to all parties involved in this litigation.
Moreover, the following testimony, not exclusive, supports the
Court’s contention that testimony was not limited to those sole
issues. Carolyn Whitworth, testified concerning accounting issues.
Moreover, she was cross-examined by the Jones Heirs on the
controversy of only one account being filed in the period from
1965 to 2015. N.T. 11/19/2015, at 11-24. Also, Donald Gavett
was extensively cross-examined by the Jones Heirs on PNC’s
fiduciary obligations concerning the oil and gas interests held by
the estate. N.T. 11/19/2015, at 107-110.
Additionally, an heir, James Ivan Phillips, was cross-examined by
the Jones Heirs on the estate’s accounting, assets, inventory, and
preference concerning the lease options before the Court, N.T.
11/19/2015, at 205-207, while Mark Munson, Market Trust
Director at PNC, was cross-examined by the Jones Heirs on the
issues of fiduciary duty, possible estate property located in West
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Virginia, authority to enter into leases, estate administration, and
whether PNC acted in the heir[s'] best interest. N.T. 12/23/2015,
at 209-230.
Thus, the record clearly establishes that the Court did not limit the
testimony to the sole issues of whether PNC had the authority to
enter into a lease with Vantage and whether the lease was in the
heirs’ best interest. Further, each of the above witnesses were
subjected to cross-examination by the Jones Heirs, among others,
as to the administration of this estate. Thus, this alleged error is
without merit and should be denied.
****
Error #5: The Court erred in dismissing the Objections
requesting a surcharge be imposed on PNC without
allowing the presentation of evidence on PNC's alleged
breaches of fiduciary duty.
In this contention, the Jones Heirs state that the Court erred in
dismissing the Objections without allowing presentation of
evidence on PNC’s alleged breaches of fiduciary duty and in not
imposing a surcharge on PNC. The imposition of a surcharge is
within the discretion of the Court and the testimony of record does
not provide a sufficient basis for the Court to impose a surcharge.
While the estate was opened in 1925, PNC did not become the
current Administrator until 2009. Given the complexities of the
estate, and the testimony submitted, it would be inequitable to
hold PNC liable for any deficiencies of past Administrators.
Moreover, the record does not support the contention that the
Court prohibited the presentation of evidence on PNC’s alleged
breaches of fiduciary duty. Every witness called was subjected to
cross-examination by the Jones Heirs, among others, as to the
administration of this estate, where appropriate.
Testimony was offered which clearly demonstrates that there is
sufficient evidence of record concerning this issue and to
demonstrate that it is without merit. Carolyn Whitworth, was
sufficiently cross-examined by the Jones Heirs concerning PNC’s
alleged breach of fiduciary duty by reason of the failure of prior
Administrators in not filing an inventory and account prior to 2009.
N.T. 11/19/2015, at 11-24. Also, an heir, James Ivan Phillips, was
cross-examined by the Jones Heirs concerning his opinion on the
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PNC’s alleged breach of fiduciary duty; N.T. 11/19/2015, at 206.
Further, the direct and cross-examination of Thomas Butz, an
attorney hired by PNC to review leases and amendments,
illustrates PNC’s extent and understanding of the fiduciary duty
owed to the heirs. N.T. 12/21/2015, at 5-186. Lastly, as
previously discussed, the testimony of Mark Munson, illustrates
the extent and understanding of PNC as to the fiduciary duty owed
to the heirs. N. T. 12/23/2015, at 136-137, 177, and 209-230.
As such, this non-exclusive testimony clearly shows that sufficient
evidence was presented into the record to dispute the argument
that the Court failed to allow testimony on PNC’s alleged breach
of fiduciary duty. We would also note that these witnesses were
subjected to cross-examination by the Jones Heirs, among others,
as to the administration of this estate.
Orphans’ Court Opinion, 1/11/2018, at 2-7 (footnotes omitted).
Having reviewed the record, we discern no basis upon which to disturb
the decision of the orphans’ court judge.
Appellants’ argument that the orphans’ court limited the hearings to the
lease issue ignores the testimony elicited by Appellants regarding PNC’s
administration of the Estate. Significantly, Appellants were represented by
counsel, were present, and participated throughout the orphans’ court
proceedings, by cross-examination, presentation of documentary evidence,
and legal argument. Evidence relating to PNC’s administration of the Estate
was presented through Appellants’ exhibits and cross-examination of PNC’s
witnesses: Donald Gavett, Vice President and Fiduciary Advisor for PNC;
Carolyn Whitworth, Esquire, of Tucker Arensberg, P.C., fiduciary counsel for
PNC as administrator d.b.n.c.t.a. of the Estate; Mark Munson, Market Fiduciary
Director for PNC, and Thomas Butz, oil and gas counsel for PNC as
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administrator d.b.n.c.t.a. of the Estate. In addition, Appellant Alberta Jones
and her husband, Ralph Jones, testified on direct examination and voiced
complaints against PNC.11 Furthermore, as will be discussed below, Appellants
had the opportunity to call other witnesses, but did not do so.
Appellants concede that at the August 31, 2016, hearing, the orphans’
court allowed argument regarding their objections to legal fees paid by PNC
and fiduciary fees taken by PNC, but argue that the orphans’ court judge
limited argument to the post-2009 administration issues. Appellants point to
the orphans’ court judge’s statement, “I am going to limit questions in this
hearing to what PNC has done with this estate since PNC acquired it sometime
in 2009.” Appellants’ Brief at 26, citing N.T., 8/31/2016, at 31. Appellants
assert they were “not given the opportunity to fully argue their Objections,
particularly as to the nearly fifty years of maladministration prior to 2009” and
“never permitted to call witnesses, take testimony, or present evidence
on their Objections.” Appellants’ Brief at 27 (emphasis in original).
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11 See e.g., N.T., 3/17/2016, at 52 (Ralph Jones: “The only assets, the
inventory I had was a copy of the 1925 inventory that I acquired myself out
of this courthouse.”), id. at 66 (“I would have liked to [have] seen [the Estate]
settled three or four years ago, you know, it’s wasted a lot of money. I believe
last year alone, 180 some thousand went out of the estate’s money to lawyers
that’s fighting the heirs.”), id. at 67 (“Most of the heirs feel PNC is going to
drain all the money and they are never going to see any of it.”); N.T.,
8/11/2016, at 178 (Alberta Jones: “[W]e have paid PNC over $200,000 in
Court costs, attorney fees, and I think it’s time to let the heirs decide what
they want to do. … [W]e have been charged because PNC has been negligent
in settling this case. Many of us have been charged a higher tax rate, and I
think that is very unfair to the heirs.”).
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We are unpersuaded by Appellants’ argument, which quotes the ruling
of the orphans’ court judge out of context. At the August 31, 2016, hearing,
Appellants’ counsel cross-examined Donald Gavett, Vice President and
Fiduciary Advisor for PNC:
And you would agree, Mr. Gavett, if the bank had distributed this
estate and closed it out in 1965 or ’66 or ’67, there would be no
need for PNC asking for administration fees today; would there?
N.T., 8/31/2016, at 29. Counsel for PNC then objected, stating, “I think he is
referring to … I believe the First National Bank of Waynesburg” and further
objected on the grounds that “I don’t know how PNC could be held accountable
for or asked questions about what [First National Bank of Waynesburg] did 51
years ago.” Id.
The orphans’ court then addressed Appellant’s counsel:
I said earlier in this proceeding that I don’t see how we could hold
PNC responsible for what’s been done with regard to the estate,
and the objections you raised that I read this morning, and I read
through them the past hour before we began the proceeding, you
seem to want to hold PNC responsible for anything that’s
happened in the estate since 1925, and I don’t know how you can
maintain that position.
If you had some legal authority to provide me I would be glad to
receive it. But it appears to me the issues should be when PNC
became the administrator of this estate and what it’s done since
then. I don’t see how they can be held accountable for what was
done by First National [Bank] of Waynesburg, First National of
Washington, Integra, who else had their hands in this.
[APPELLANTS’ COUNSEL]: I think, Your Honor, when you merge
two businesses, the successor business gets also liabilities and
claims that are existent. They don’t go away, and that’s what they
are suggesting that their liabilities and claims for the improper
administration of this estate goes away.
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THE COURT: Absent some evidence … of what the bank
assumed when it acquired National City, I am going to limit
the questions in this hearing to what PNC has done with this estate
since PNC acquired it sometime in 2009.
[APPELLANTS’ COUNSEL]: I have no further questions. Thank
you.
Id. at 30-31 (emphasis added).
Appellants argue to this Court that “[i]t is well settled that the surviving
corporation in a merger succeeds to all assets, liabilities and rights of action
held by the merged corporation.”12 Appellants contend “the Estate has had
the same Administrator since 1965, even if that Administrator’s name changed
a few times,” and maintain “PNC assumed all of the predecessor banks’
liabilities to the heirs.” Appellants’ Brief at 29-30.
We recognize that a successor corporation may assume the liabilities of
the predecessor corporation.13 However, Appellants presented no evidence
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12 Appellants’ Brief at 28 (citations omitted).
13 “[W]hen one company sells or transfers all of its assets to another
company, the purchasing or receiving company is not responsible for the debts
and liabilities of the selling company simply because it acquired the seller’s
property.” Johnson v. Am. Std., 8 A.3d 318, 322 n.1 (Pa. 2010). “This
general rule of non-liability can be overcome, however, if it is established that
(1) the purchaser expressly or implicitly agreed to assume liability, (2) the
transaction amounted to a consolidation or merger, (3) the purchasing
corporation was merely a continuation of the selling corporation, (4) the
transaction was fraudulently entered into to escape liability, or (5) the transfer
was without adequate consideration and no provisions were made for
creditors of the selling corporation.” Id. (emphasis added).
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as to PNC’s acquisition of National City. Mr. Gavett testified he had worked
on the Estate while he was employed by several banks that preceded PNC,
namely, First National Bank of Washington,14 Integra Bank, and National City
Bank. However, Mr. Gavett’s testimony that PNC Bank assumed responsibility
for the Estate in 2009 “when the merger of National City and PNC was
completed,”15 cannot be regarded as evidence of merger since Mr. Gavett was
a trust officer called to testify regarding his knowledge of the administration
of the Estate, and there was no showing that he was qualified to testify
regarding the terms of PNC’s acquisition of National City, nor National City’s
acquisition of its predecessor. Moreover, the orphans’ court judge’s ruling,
that “[a]bsent some evidence … of what the bank assumed when it
acquired National City, I am going to limit the questions in this hearing to
what PNC has done with this estate since PNC acquired it in 2009,” clearly
advised Appellants there was no evidence that showed PNC assumed its
predecessors’ liabilities. Therefore, while Appellants argue that the orphans’
court judge led them to believe the surcharge issue would be addressed at a
future time, the transcript belies their position. Appellants were on notice at
the August 31, 2016 hearing that their objections as to the administration of
the Estate prior to 2009 were barred for lack of evidence that PNC assumed
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14National Bank of Washington succeeded the first corporate fiduciary, First
National Bank of Waynesburg.
15 N.T., 11/19/2015, at 40.
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the liabilities of National City or any other predecessor bank when PNC
acquired it. Appellants never presented such evidence.
Following the August 31, 2016 hearing, the court convened on October
27, 2016 for a continuation of the August 11, 2016 evidentiary hearing. At
the outset, the orphans’ court addressed Appellants’ counsel, noting that when
the August 11, 2016 evidentiary hearing concluded Appellants’ counsel had
had his witness, Alberta Jones, on the stand. The orphans’ court judge asked
if Ms. Jones had completed her testimony and Appellants’ counsel indicated
that she had. The orphans’ court judge then questioned Appellants’ counsel
as to whether he had any other witnesses, and Appellants’ counsel indicated
he had no other witnesses. See N.T., 10/27/2016, at 3. The October 27,
2016 hearing concluded without any party presenting evidence.
Thereafter, on October 28, 2016, the orphans’ court issued an order that
cancelled future hearings. Appellants did not object, and never requested the
orphans’ court to allow the record to remain open for evidence of PNC’s liability
for its predecessor banks’ administration. Consequently, we believe the
orphans’ court correctly concluded:
While the estate was opened in 1925, PNC did not become the
current Administrator until 2009. Given the complexities of the
estate, and the testimony submitted, it would be inequitable to
hold PNC liable for any deficiencies of past Administrators.
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J-A17011-18
Orphans’ Court Opinion, 1/11/2018, at 6.16
As the record in this case demonstrates Appellants, through counsel,
participated in all the evidentiary hearings held in this matter, and had the
opportunity to present witnesses and evidence to show PNC’s liability prior to
2009 (but failed to do so), Appellants’ claim that the orphans’ court dismissed
their objections without affording them a meaningful opportunity to present
evidence and take testimony in support of their surcharge objections fails to
warrant relief.
Accordingly, we affirm.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/27/2018
____________________________________________
16 Furthermore, the record is devoid of evidence that the living beneficiaries,
as each successor bank assumed administration of the Estate, ever objected
to fees or requested an accounting, although they had every right to do so.
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