In Re: Cowan, R., Appeal of: Cowan, N.

J-A23035-18
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: RICHARD D. COWAN, DECEASED IN THE SUPERIOR COURT
OF PENNSYLVANIA
v.
APPEAL OF: NORMA D. COWAN
No. 312 WDA 2018
Appeal from the Order Entered February 13, 2018
In the Court of Common Pleas of Allegheny County
Orphans' Court at No: 245 of 2016
BEFORE: BOWES, SHOGAN, and STABILE, JJ.
MEMORANDUM BY STABILE, J.: FILED MARCH 19, 2019
Appellant, Norma D. Cowan, appeals from the February 13, 2018 order
denying her claim against the estate of her son, Richard D. Cowan
(“Decedent”). We reverse and remand.
At the time of his death at age 57 on November 17, 2015, Decedent, an
internationally known opera singer, and his estranged wife, Uliana
Kozhevnikova, owned a home in Pittsburgh (the “Pittsburgh Home”) subject
to a five-year $220,000.00 balloon mortgage. In 2014, while Decedent was
working in France, Kozhevnikova began receiving letters threatening
foreclosure on the Pittsburgh Home. Appellant contacted his parents
(Appellant and Paul Cowan1) for help. Decedent’s parents, with the help of
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1 Appellant and Paul Cowan filed the claim jointly. Paul Cowan subsequently
passed away. N.T. Hearing, 1/16/18, at 3.
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their financial advisor, Matthew Olver, devised a plan to pay the $197,058.66
outstanding on the mortgage of the Pittsburgh Home. Decedent’s parents
borrowed $30,000.00 and liquidated $26,858.66 in investment funds, and
Decedent contributed $140,200.00 from an IRA.
According to Appellant, Decedent intended to repay his parents and
replenish his IRA with proceeds from the sale of property Decedent owned in
France (the “French Property”). When it became evident that Decedent would
not consummate the sale within the 60-day IRS grace period, Decedent’s
parents took out a line of credit of $140,200.00 to replenish Decedent’s IRA,
which they did by wire transfer on November 19, 2014. In August of 2015,
Decedent’s parents asked his sister, Marcy Cowan, to arrange for a promissory
note memorializing Decedent’s obligation to repay his parents. Decedent died
suddenly in Pittsburgh in November of 2015, and there is no evidence that he
ever received or signed a note.
The record reveals that the French Property sold, with net proceeds to
Decedent of $110,530.00, on October 14, 2015 shortly before Decedent’s
passing. From the proceeds, he made a partial repayment to his parents of
$59,464.08 toward the $197,058.66 they advanced to him. Unable to resolve
the remaining outstanding balance with Kozhevnikova, the administratrix of
Decedent’s estate, Appellant filed a claim for $151,106.10 on May 15, 2016,
representing the outstanding unpaid principle and interest, and a
supplemental claim of $24,350.12 on December 24, 2017 for additional
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accrued interest. The trial court conducted a hearing on January 16, 2018
and, on February 13, 2018, issued the order denying Appellant’s claim. This
timely appeal followed.
Appellant presents two assertions of error:
1. The trial court erred as a matter of law and abused its discretion
by denying that part of the claim seeking repayment of the loan
made by Paul and Norma Cowan to [Decedent], when the
record established by clear and convincing evidence that a loan
was made and not a gift.
2. The trial court erred in not admitting the emails from Decedent
to Cuyler Etheredge finding them to be hearsay and not
authenticated.
Appellant’s Brief at 5.
Our standard of review is as follows:
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.
In re Fiedler, 132 A.3d 1010, 1018 (Pa. Super. 2016), appeal denied, 145
A.3d 166 (Pa. 2016). “However, we are not constrained to give the same
deference to any resulting legal conclusions.” Id. Our review of questions of
law is de novo, and our scope of review is plenary. “[A] claim against a
decedent’s estate can be established and proved only by evidence which is
clear, direct, precise and convincing.” Estate of Allen, 412 A.2d 833, 836
(Pa. 1980). “[T]he burden of proof lies upon the claimant.” Id.
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The trial court found that the transfer of funds from Decedent’s parents
to Decedent was presumed to be a gift, and that Appellant failed to adduce
sufficient evidence to overcome that presumption. The trial court’s decision
was legally erroneous and devoid of support in the record. The trial court
relied on Hornyak v. Sell, 629 A.2d 138 (Pa. Super. 1993), in which we cited
the “settled proposition that ‘[i]f a parent furnishes the purchase money and
title to property is taken in the name of a child, a presumption arises that the
parent intended the funds to be a gift.’” Id. at 140 (quoting Kohr v. Kohr,
413 A.2d 687, 689 (Pa. Super. 1979)). Hornyak explained that this
presumption arose from § 443 of the Restatement (Second) of Trusts:
Where a transfer of property is made to one person and the
purchase price is paid by another, and the transferee is a wife,
child, or other natural object of bounty of the person by whom the
purchase price is paid, and the latter manifests an intent that the
transferee should not have the beneficial interest in the property,
a resulting trust arises.
Id. at 140 (quoting Restatement (Second) of Trusts § 443).
In Hornyak, the defendant’s father-in-law lent him $5,000.00 toward
closing costs for the purchase of a home. This Court declined to consider
whether the presumption applied, noting sufficient evidence—including oral
promises of repayment from the son-in-law—that the parties to the
transaction did not intend a gift. Id. at 141-42.
The presumption is plainly inapplicable here, as no transfer of property
occurred. Rather, Decedent’s parents provided funds to help him pay off a
balloon mortgage on the Pittsburgh Home, which Decedent already owned.
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Then, Decedent’s parents provided additional funds so that Decedent could
replenish a tax-sheltered retirement account instead of paying taxes and
penalties to the IRS. Neither the trial court nor the estate cites any law holding
that a gift presumption applies under these circumstances.
Furthermore, as in Hornyak, the record provides ample evidence that
Decedent and his parents intended the funds to be a loan. Indeed, the record
is devoid of evidence indicating otherwise. In her claim against the estate,
Appellant documented an account she set up to receive, by wire transfer, the
proceeds of Decedent’s sale of the French Property. Claim, 5/15/16, at ¶ 13
and Attachment F.2 According to the claim, the Decedent satisfied $59,464.08
of his debt to his parents from the proceeds of the French Property sale. Id.
at ¶ 17(e).
At the hearing, Olver testified that he discussed with Decedent’s parents
the possibility of making a gift to Decedent, and told them that, if they did so,
they would need to file a tax return acknowledging the money as such.
N.T. Hearing, 1/16/18 at 29. To Olver’s knowledge, Decedent’s parents filed
no such return. Id. at 29, 47. Instead, Olver recommended structuring the
transaction as a loan in order to avoid a significant gift tax, and that is how
the parties proceeded. Id. at 29. Furthermore, Olver testified that, “[b]ased
on people of their age [90 and 87 as of the filing of the claim], I would not
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2 In an apparent typographical error, the document lists the originator of the
funds as “Richard M. Cowan” rather than Richard D. Cowan.
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have recommended that they extract $200,000 from their investment portfolio
that would not be there for their own wellbeing.” Id. at 48.
Olver also referenced a chain of emails in which the Decedent wrote: “I
can come up with what I can here, but if they loan me $50,000, would that
finish this off?” Id. at 31. Further, “Would this be a huge dilemma financially
for them if this is just a loan to be repaid by a family member?” Id. at 32.
Olver testified that he would not have advised Decedent’s parents to take out
a line of credit of $200,000.00 to make a gift. Id. at 42-43. He advised that
course of action only because they expected repayment. Id. Olver testified
that he recommended a note. Id. at 43. As reflected above, the record does
not establish that Decedent ever signed a note.
Marcia Cowan, Decedent’s sister, testified about a promissory note that
was prepared to “memorialize” the debt Decedent owed to his parents. Id. at
63. She tried to get a copy of the note to Decedent through Kozhevnikova.
Id. at 64. Kozhevnikova did not recall ever receiving the note and said she
did not present a note to Decedent. Id. at 85-86. As noted above, there is
no evidence that Decedent signed it before his death. Id. at 70-71.
In summary, the trial court committed an error of law in relying upon
an inapplicable gift presumption. Regardless of the presumption, the record
contains clear and convincing evidence that the transactions in question were
loans. The claim documents an account Appellant opened up and funded with
a wire transfer from Decedent representing the proceeds of the sale of the
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French Property. Decedent’s debt to his parents was partially paid off from
those funds. Moreover, Olver testified that the parties structured the
transaction as a loan in order to avoid a significant gift tax. He also testified
that Decedent’s parents were not in position to gift the amount of money
involved, given their ages and their financial resources. Olver also testified
about emails in which Decedent expressly referred to the arrangement as a
loan. The record clearly establishes that Decedent’s parents acted to help
Decedent stave off financial calamities—first a mortgage foreclosure and then
federal taxes and penalties on a tax-deferred retirement account. No evidence
supports a finding that Decedent’s parents simply gifted money to him.
The absence of a signed promissory note does not alter our conclusion.
On the facts of this case, the absence of a signed note is not surprising.
Decedent’s sister attempted to get the note to Decedent through his estranged
wife, as Decedent was in France at the time. Kozhevnikova denied receiving
the note or presenting it to him. Decedent’s failure to sign the note can be
attributed to his sudden and unexpected passing, rather than his refusal to
acknowledge the debt. As we have already discussed, there is no evidence
that any party treated the money as a gift rather than a loan.
In her second assertion of error, Appellant argues the trial court erred
in refusing to admit into evidence two emails from Decedent’s email account
in which he expressly referred to the transaction as a loan. Given our analysis
of Appellant’s first issue, we find it unnecessary to resolve the second. The
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record contains clear and convincing evidence of a loan regardless of the
disputed emails. Admission of the disputed emails would result in cumulative
evidence, inasmuch as Olver testified to several emails in which Decedent
acknowledged the debt.
For all of the foregoing reasons, we reverse the trial court’s order and
remand for further proceedings consistent with this Memorandum.
Order reversed. Case remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/19/2019
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