discussing a surcharge as punishment for a fiduciary’s misconduct
How later courts described this case
- discussing a surcharge as punishment for a fiduciary’s misconduct
Written by the judges who cited it.
The opinion
J-A18022-19
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: THE MATTER OF THE ESTATE : IN THE SUPERIOR COURT OF
OF ERIC S. WAITE : PENNSYLVANIA
:
:
APPEAL OF: LISA D. WAITE :
:
:
:
: No. 157 WDA 2019
Appeal from the Order Entered January 11, 2019
In the Court of Common Pleas of Jefferson County Orphans’ Court at
No(s): O.C. 68-2018
BEFORE: BOWES, J., NICHOLS, J., and MUSMANNO, J.
MEMORANDUM BY NICHOLS, J.: FILED FEBRUARY 24, 2020
Appellant Lisa D. Waite appeals from the order1 directing her to restore
the decedent’s credit union accounts to the estate of Eric S. Waite (the
decedent). Appellant argues that she owned all funds in the accounts when
the decedent died and that the accounts did not pass into the decedent’s
estate. Appellant also claims the trial court erred when finding that she
violated her duties under a power of attorney (POA). We affirm.
By way of a brief background, the record indicates that the decedent
was married and lived on a working farm with his wife, Ladonna. The decedent
and his wife had one daughter, Whitney Louise Basinger (Whitney),2 and two
____________________________________________
1 A party may appeal as of right from the order of the Orphan’s Court Division
that determines in interest in real or personal property. See Pa.R.A.P. 342(6).
2 The parties referred to decedent’s daughter as either Whitney or Louise. We
refer to the decedent’s daughter as Whitney for the purpose of this appeal.
J-A18022-19
sons, Jesse Waite (Jesse) and James Waite (James). James married Appellant
in the early 1980’s, and they had two children, Colin and Michael.
The trial court summarized its factual findings as follows:
1. In 1987, Appellant called [the decedent] to ask for help after
she and James had a domestic dispute that left her with
bruises. [The decedent] picked her up and took her to his
home for an undisclosed period of time, after which she
returned to James.
2. After that, [the decedent’s wife] refused to have any further
contact with either James or [Appellant], which meant they
were not welcome to call or visit the Waite farm.
3. Unlike his wife, [the decedent] continued to talk with [James
and Appellant] after the abuse incident, but only when he
saw them on the street or in a store.
4. [The decedent] reached out to James after [the decedent’s]
wife died in April of 2006. James then began to visit
regularly and help [the decedent] on the farm. [Appellant]
visited, as well, though far less frequently. That
arrangement continued uninterrupted until mid-2012.
5. [The decedent] suffered a series of mini-strokes in the
summer of 2012, and in July of that year, he moved in with
Whitney for approximately nine months.
6. On July 19, 2012, [the decedent] executed a durable POA
naming Whitney as his agent and a last will and testament
leaving $1.00 each to his son Jesse and grandsons,
$1,000.00 each to James and [Appellant], and the residue
and remainder of his estate to Whitney. He also named
Whitney as the designated beneficiary on his checking and
savings accounts.
7. Whitney had no cause to exercise her authority as POA, and
in April of 2013, [the decedent] regained his health and was
able to return to the farm. James and [Appellant] resumed
contact at that point.
8. [The decedent] was still living at the farm when he decided
to change his will, and upon his request, [Appellant] drove
him to Attorney George Kulakowski’s office and witnessed
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his signature on January 6, 2014. They did not discuss its
terms, and [Appellant] was unaware of the prior will. [The
January 6, 2014 will left $1.00 each to the decedent’s son
Jesse and the decedent’s grandsons. The January 6, 2014
will also directed that the residue of the estate be divided
evenly among James, Appellant, and Whitney. The
decedent named Attorney Kulakowski as executor.]
9. Having directed that his estate be distributed in equal shares
to James, [Appellant], and Whitney, [the decedent] took
possession of his new will and secured it with various other
documents at his home. [Appellant] and James became
aware of [the January 6, 2014 will] a few weeks later.
10. James testified . . . that [the decedent] was competent when
he executed [the January 6, 2014] will and that it reflected
his wishes.
* * *
12. A few weeks after executing [the January 6, 2014 will, the
decedent] was admitted to the hospital. He was suffering
from acute delirium occasioned by severe dehydration.
13. The delirium associated with dehydration disappears within
hours to days of treatment, and there was no credible
evidence that [the decedent] did not recover his mental
faculties accordingly. For undisclosed reasons, however, a
hospital social worker advised James and [Appellant] that
he could no longer live by himself. He thus moved in with
[James and Appellant] while they searched for an
appropriate long-term care facility.
14. [The decedent] was actively involved in choosing his
placement. He first made it clear that he did not want to
reside at Mulberry Square, as it carried unpleasant
memories with his deceased wife’s stay, or give his money
to the doctor that owned Mahoning Riverside Manor. He
then approved the AM/PM Personal Care Home [(AM/PM)]
after accompanying James and [Appellant] to inspect the
facility.
15. During his stay with James and [Appellant], [the decedent]
experienced episodes of incontinence and issues with his
mobility. Whereas James’s testimony regarding [the
decedent’s] dementia-like episodes was not independently
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credible and there was no corroborating evidence of
compromised cognition, however, the [c]ourt does not find
that [the decedent] also exhibited signs of cognitive
dysfunction during that timeframe.
16. Evidence of [the decedent’s] continuing capacity includes
his ability to actively participate in selecting his permanent
residence and to accurately advise [Appellant] as to the
identity and whereabouts of the documents he wanted her
to retrieve from his house.
17. [On February 14, 2014, the decedent signed a POA naming
Appellant as his agent]. An independent and disinterested
party, Attorney Jeffrey Lundy’s actions confirmed [the
decedent’s] capacity during the relevant time period. An
experienced estate attorney who had prepared hundreds of
POAs, he spoke with the decedent at some length before
preparing [a] POA naming [Appellant] as his agent, and one
of his goals was to ascertain the [decedent’s] capacity to
execute such a document. To that end, he established,
among other things, that [the decedent] was fully aware of
the nature and extent of his property.[fn1]
Attorney [Jeffrey] Lundy did not actually recall his
[fn1]
interactions with [the decedent]. He testified about
his general practice with respect to preparing POAs,
however, and the [c]ourt may reasonably assume that
he followed the same procedures before allowing [the
decedent] to sign the POA in question.
18. In addition to securing [the decedent]’s signature, Attorney
Lundy had [Appellant] sign the POA to acknowledge her
understanding and acceptance of its requirements, including
the specific requirements that she exercise her powers for
[the decedent’s] benefit; that she keep her assets separate
from his; and that she keep a full and accurate record of her
actions and transactions as made on his behalf.
19. Before leaving Attorney [Jeffrey] Lundy’s office that day,
[the decedent] accepted the bill for the POA, retrieved a
check from his shirt pocket, and wrote it out to the
appropriate recipient and in the appropriate amount. He did
so without assistance.
20. At [the decedent’s] direction, [Appellant] next took him to
Priority First Federal Credit Union, where he asked the teller
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to remove Whitney and add [Appellant] as the POA and
designated beneficiary of his checking and savings
accounts. [Appellant] did not join the discussion until after
the account change card was completed.
21. As [Appellant] from was driving home from the credit union,
[the decedent] explained that she, as his designated
beneficiary, would automatically become sole owner of [the
credit union] accounts after he died.
22. [Appellant] told James that same day about what transpired
at Attorney [Jeffrey] Lundy’s office and that [the decedent]
had changed the POA designation on [the credit union]
accounts. That came to no surprise to James, who had been
part of the conversation in which it was decided that
[Appellant] was the most feasible choice to be [the
decedent’s] POA. Because [Appellant] did not tell him,
however, James did not have the opportunity to react to
[the decedent’s] decision to make her his designated
beneficiary.
* * *
25. On February 21, 2014, after living with James and
[Appellant] for approximately two weeks, [the decedent]
became a resident at AM/PM.
* * *
29. With no expectation of returning home, [the decedent]
agreed to sell the farm at auction and gave [Appellant] the
names of a few auctioneers she could contact. [The farm
and the equipment was sold in October of 2014.] The final
result was a check from Amy Morris in the amount of
$147,082.28 for the real estate and a check from Timothy
Powell in the amount of $16,500.00 for the equipment. At
[the decedent’]s direction, [Appellant] deposited both into
his savings account. [On November 19, 2014, the decedent
executed a codicil to the will. With James’s blessing, the
decedent made Appellant his executor rather than Attorney
Kulakowski].
30. As [the decedent’s] POA, [Appellant] assumed responsibility
for paying his bills after he moved into [AM/PM]. That
included [writing] multiple checks to The Serene Law Firm
for services performed on behalf of [the decedent]. Prior to
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that time, [the decedent] had been issuing most of his own
checks.[]
31. [The decedent] continued to keep track of his financial
affairs even after [Appellant] took over, directing her to
bring his financial statement to AM/PM each month so he
could review them and giving her specific instructions at
times on how to manage his [credit union] accounts.
Concluding that his checking account was growing too large,
for instance, he asked her in October of 2015 to transfer
$30,000 to savings.
32. Because [the decedent]’s insurance paid for all but
incidental expenses at AM/PM and the skilled nursing facility
to which he was transferred in 2015, [the decedent]’s
checking account continued to grow each month by the
amount of his pension and other smaller deposits. . . .
Op. on Pet. & Objections, 1/11/19, at 1-5 (record citations and some footnotes
omitted).
In 2016, James and Appellant separated. They divorced in October of
2016. Appellant did not inform the decedent of the divorce. According to the
trial court:
33. [Appellant] continued to be [the decedent]’s POA until he
died. Her divorce from James in October of 2016 did not
change that in the eyes of the law, and because no one told
him about the change in their marital status, [the decedent]
never had the opportunity to decide whether he wanted to
remove [Appellant] as his POA or as a one-third beneficiary
of his estate.
34. James did not object to [Appellant] continuing as [the
decedent]’s POA after the divorce, as he believed she was
still doing a good job. In that regard, he knew [the
decedent’s] bills were being paid and that [Appellant] was
making sure he had everything he needed.
35. After [the decedent] died[, the register of wills admitted the
decedent’s January 6, 2014 will and the November 19, 2014
codicil to probate and granted letters testamentary to
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Appellant on February 12, 2018. James] asked [Appellant]
about [the decedent’s] stocks and how much money he had.
[Appellant] advised him to talk to [his divorce] lawyer, at
which point he went to Attorney [Jay] Lundy[3] to make
further inquiries. As a result, he learned for the first time in
March of 2018 that [Appellant] was designated beneficiary
of [the decedent’s credit union] accounts and, as such, was
claiming the entire corpus of both.
36. That revelation clarified in James’s mind why [Appellant]
had declined any portion of the marital estate when they
divorced.
37. Had [James] known sooner that [Appellant] was [the
decedent’s] designated beneficiary and the attendant
implications, James credibly testified, he would have
challenged the POA sooner and made sure [the decedent’s
credit union] accounts would become part of the estate upon
his death.
Id. at 5-6 (record citations and some footnotes omitted). By the time of his
death, the decedent’s credit union accounts had $57,749.02 in checking and
$502,787.68 in savings.
On July 14, 2018, Whitney and James filed a petition for citation of
appeal against probated will and rescission of actions taken under power of
attorney. They alleged, in part, that Appellant designated herself as the
beneficiary of the credit union accounts, engaged in unfair dealing, exerted
undue influence over the decedent, and violated her duties under the POA.
Whitney and James’s petition requested that the court rescind Appellant’s
designation as a beneficiary on the credit union accounts, force an accounting,
____________________________________________
3 As noted above Attorney Jeffrey Lundy acted as counsel when the decedent
signed the POA. Attorney Jay Lundy was counsel for James in the divorce
proceeding.
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J-A18022-19
and require Appellant to remit all funds from the accounts to the estate.
Additionally, Whitney and James requested that Appellant be removed as
executor of the decedent’s estate.
On July 31, 2018, the trial court issued a preliminary decree awarding a
citation and directing Appellant to show cause why Whitney and James’s
appeal from the probated will should not be sustained. On August 20, 2018,
Appellant filed an answer and new matter.
On August 23, 2018, the trial court entered an order directing Appellant
to provide an accounting within ten days. The order scheduled a hearing for
December 20, 2018, to determine “whether or not [the decedent] was unduly
influenced in signing both the [POA] and the bank card” designating Appellant
as the beneficiary. Order, 8/23/18.
At the December 20, 2018 hearing, Whitney and James testified on
behalf of their petition. They also called Connie Giroskey, a manager at
AM/PM, and Appellant as of cross. Appellant testified on her own behalf and
called Gregory Peace, a friend of the decedent, and David J. LaPorte, Ph.D.,
who was qualified as an expert in psychology.
On January 11, 2019, the trial court concluded that Whitney and James
lacked standing to challenge Appellant’s appointment as executor of the
decedent’s estate. The trial court also found that Appellant did not unduly
influence the decedent when he signed the POA or designated Appellant as
the beneficiary of the credit union accounts. The trial court further determined
that although the decedent was diagnosed with dementia before entering
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AM/PM in February of 2014, “it was not until early 2017 that significant
cognitive deficits were observed.” Op. on Pet. & Objections at 4.
However, the trial court concluded that Appellant “abused her power
and authority as the decedent’s [POA].” Order 1/11/19. The trial court
directed Appellant to submit a full accounting regarding the credit union
accounts from the date she became POA and “take whatever steps are
necessary to restore the decedent’s checking and savings accounts to [the
decedent’s] estate for distribution.” Id.
In support of its decision to have Appellant restore the credit union
accounts to the decedent’s estate, the trial court reasoned:
In large print covering less than one-quarter of a standard sheet
of paper, the last page of the POA specifically referenced Chapter
56 of Title 20 and contained four specific affirmations that
[Appellant] adopted as [the decedent’s] agent. They included, “I
shall exercise the powers for the benefit of the principal” and “I
shall keep the assets of the principal separate from my assets.”
Those statements correspond with the duties enumerated in 20
Pa.C.S.[] § 5601.3(b)(1), which also obligated [Appellant] to
“[a]ct so as not to create a conflict of interest that impairs the
agent’s ability to act impartially in the principal’s best interest”
and to “[a]ttempt to preserve the principal’s estate plan, to the
extent actually known by the agent, if preserving the plan is
actually in the principal’s best interest based on all relevant
factors.” [20 Pa.C.S.] § 5601[.3](b)(2) & (6). By acquiescing to
[the decedent’s] decision to name her as his designated
beneficiary, [Appellant] violated each of the duties.
Although the evidence does not indicate that [Appellant] was
depositing her own income into [the decedent’s] accounts or
transferring any of his money into hers—excepting the
compensation she was legitimately receiving for her POA
services—her status as his designated beneficiary meant, in
effect, that his money was her money. She certainly understood
that; she grasped right away that every penny would become hers
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to utilize as she wished once [the decedent] passed, and she
certainly should have comprehended that [the decedent’s]
decision thus effectuated a co-mingling of their assets.
What [Appellant] unquestionably knew, moreover, was that her
being [the decedent’s] designated beneficiary did not comport
with the terms of the [the January 6, 2014] will he had executed
just five weeks before. She had read that will only days before
taking [the decedent] to the credit union and thus knew that he
only planned to leave her a third of the assets and wanted to
divide the other two-thirds between James and Whitney. Yet she
chose to remain silent on February 14, 2014 and every day
thereafter and, knowing that all the money would eventually be
hers, was content to see the balance of [the decedent’s] accounts
increase month by month. Knowing the money would eventually
be hers, moreover, she raised no objection when [the decedent]
instructed her to deposit the proceeds from the farm and
equipment sales into his savings account.
As the record reflects, the risk envisioned in [20 Pa.C.S.
§5601.3(b)(2)] was also realized when [Appellant] failed to keep
her assets separate from [the decedent’s]. Confronted with the
likelihood of becoming hundreds of thousands of dollars richer as
[the decedent’s] designated beneficiary, she made no attempt to
caution him about how it would affect his estate plan. Evidencing
a pernicious mindset, moreover, she kept the designation a secret
even from Whitney and [James] her own husband—the only other
people who would be affected and might force her to relinquish
her claim to all of [the decedent’s] liquid assets.
Further highlighting the conclusion that [Appellant] was acting in
her own best interests, not [the decedent’s], was her continued
silence during her and James’s divorce. She knew [the decedent]
wanted a third of his estate to go directly to his son. She knew
the collective balance of his deposit accounts would have
significantly increased the size of the estate. And she knew a
divorce would ensure that James got none of that money.
Even assuming [Appellant] had convinced herself that [the
decedent] did not want his money to pass through his estate, the
only reasonable conclusion [Appellant] could have come to would
have been that he wanted her and James to benefit from it, as
she knew he believed even at the time of his death that they were
still married. Even were it plausible that she was merely trying to
honor [the decedent’s] wishes when she initially accepted the
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benefit of being his designated beneficiary, therefore, her
persistent failure to advise James even amidst would effectively
contradict the notion that she continued to afford [the decedent’s]
interests . . . over her own.
Op. on Pet. & Objections at 7-8 (emphases in original).
Appellant timely appealed from the January 11, 2019 order and
complied with the trial court’s order for her to file and serve a Pa.R.A.P.
1925(b) statement. The trial court issued a Rule 1925(a) opinion stating that
its findings of fact and credibility determination were supported by the record.
Appellant presents the following questions for review:
[1]. Did the [trial court] err in finding that Appellant had violated
her duties under a [POA] from the decedent and that such
violation invalidated [the decedent’s] designation of Appellant as
beneficiary of his [credit union] accounts, where the beneficiary
designation was not the product of undue influence or weakened
intellect?
[2]. Did the [trial court] err in failing to find that Appellant was
the owner of [the decedent’s credit union] accounts upon his
death where [the decedent] had designated her as beneficiary of
those accounts and there was no evidence of any contrary intent
by [the decedent]?
Appellant’s Brief at 5.
We summarize Appellant’s arguments in support of her issues together.
First, Appellant asserts that the trial court granted relief based on a theory
that Whitney and James did not plead. Id. at 23. Second, Appellant argues
that she did not violate the POA. Id. at 21. Third, Appellant claims that even
if she breached her duties as POA, the trial court erred when it invalidated the
beneficiary designation to the credit union accounts. Fourth, Appellant asserts
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J-A18022-19
that the trial court failed to apply the Multiple-Party Accounts Act (MPAA), 20
Pa.C.S. §§ 6301-6306. Id. at 39. We will address Appellant’s arguments in
more detail below.
Initially, we note that the following principles govern our review:
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 Orphans’
Court’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.
When the trial court has come to a conclusion through the exercise
of its discretion, the party complaining on appeal has a heavy
burden. It is not sufficient to persuade the appellate court that it
might have reached a different conclusion if, in the first place,
charged with the duty imposed on the court below; it is necessary
to go further and show an abuse of the discretionary power. 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 of
record, discretion is abused. A conclusion or judgment constitutes
an abuse of discretion if it is so lacking in support as to be clearly
erroneous.
We are not constrained to give the same level of deference to the
orphans’ court’s resulting legal conclusions as we are to its
credibility determinations. We will reverse any decree based on
palpably wrong or clearly inapplicable rules of law. Moreover, we
are not bound by the chancellor’s findings of fact if there has been
an abuse of discretion, a capricious disregard of evidence, or a
lack of evidentiary support on the record. If the lack of evidentiary
support is apparent, reviewing tribunals have the power to draw
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their own inferences and make their own deductions from facts
and conclusions of law. Nevertheless, we will not lightly find
reversible error and will reverse an orphans’ court decree only if
the orphans’ court applied an incorrect rule of law or reached its
decision on the basis of factual conclusions unsupported by the
record.
In re Jackson, 174 A.3d 14, 23-24 (Pa. Super. 2017) (citation omitted).
As to Appellant’s first argument that the trial court granted relief on a
theory not raised in Whitney and James’s petition, Appellant notes the trial
court rejected Whitney and James’s claim that Appellant designated herself as
the beneficiary of the credit union accounts. Appellant’s Brief at 23-24.
Appellant asserts that Whitney and James did not allege Appellant violated the
POA, but that the trial court granted relief based on its findings that Appellant
violated various duties as the decedent’s agent. Id.
This Court has stated that “[u]nder Pennsylvania’s fact pleading system,
the complainant need only state the material facts upon which a cause of
action is based. The duty to discover the cause or causes of action rests with
the trial court.” Rellick-Smith v. Rellick, 147 A.3d 897, 900 n.8 (Pa. Super.
2016) (citations and internal alterations omitted). Nevertheless, “[i]t has long
been held that a court may not raise an issue sua sponte that does not involve
the court’s subject matter jurisdiction. Nor should a trial court act as a party’s
advocate.” In re Estate of Tscherneff, 203 A.3d 1020, 1026-27 (Pa. Super.
2019) (citations and internal alterations omitted).
Instantly, a review of Whitney and James’s petition shows that they
initially focused on claims that Appellant designated herself as the beneficiary
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of the credit union accounts and concealed facts regarding the beneficiary
designation and deposits into the accounts. Alternatively, they asserted that
Appellant unduly influenced the decedent to designate her as beneficiary of
the accounts. Whitney and James stated that those actions violated
Appellant’s fiduciary duties to act in the interests of the decedent, particularly
as it related to the proceeds from the sale of the farm and equipment. See
Pet. at ¶¶ 19-27, 31-33; see also Rellick-Smith, 147 A.3d at 900 n.8.
Subsequently, at the hearing on the petition, counsel for Whitney and
James examined Appellant regarding the deposit of the decedent’s funds into
the credit union accounts and her failure to create a separate account.
Counsel for Appellant did not object. Further, in response to Appellant’s
motion for non-suit, counsel for Whitney and James argued:
It’s also dealing with the powers as power of attorney knowing
that situation over the 4 years when that account grew from
$260,000 to $570,000 over the next 4 years and have a duty—
that’s why they changed the laws with agents as far as keeping
assets separate, doing it for the benefit of the principal, not the
agent. So you’re not just talking that, what’s happened on
February 14th, that the accounts were not the same as of January-
February of 2018. So you have to couple that in that particular
situation too that those accounts are growing and acting as the
power of attorney during that time.
N.T., 12/20/18, at 191-92. Appellant did not object, and the trial court denied
Appellant’s motion for non-suit.
Therefore, even if Whitney and James failed to plead that Appellant
breached the POA based on a conflict of interest or commingling assets, the
trial court was entitled to consider the evidence and theories raised by Whitney
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and James at trial. In the absence of contemporaneous objections, we have
no basis to grant relief on Appellant’s assertion that the trial court granted
relief on a theory not specifically pled by the Whitney and James. Cf. Pa.R.A.P.
302(a).
Appellant’s second and third arguments are related, and we will address
them together. Appellant essentially claims that the trial court erred in
rescinding the beneficiary designation based on the alleged violations of the
POA. Specifically, Appellant asserts that she faithfully performed her duties
as the decedent’s agent. Appellant contends that she did not commingle
assets. Id. at 24-25. She asserts there was no inherent conflict of interest
between her acting as the decedent’s agent under the POA and her designation
as beneficiary of the credit union accounts. Id. at 25-26 (citing 20 Pa.C.S. §
5601.3(c)(2)).
Appellant further claims that she had no duty to object to her
designation as the beneficiary of the accounts and that it would be improper
to refuse the decedent’s instructions to deposit funds into the accounts. Id.
at 27-28. Appellant emphasizes that her duties were “routine” and included
making deposits, paying bills, bringing the decedent mail, and carrying out
the decedent’s instructions. Id. at 28. Appellant argues that she was not
qualified to provide financial advice and did not assume a duty to inform the
decedent of the possible differences between the distributions called for in the
decedent’s will and the beneficiary designation of the credit union accounts.
Id. at 27-29. Appellant also asserts that she had no duty to inform the
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decedent that she divorced James or to tell James that she was the beneficiary
of the accounts. Id. at 30-35.
Moreover, Appellant contends that the record did not support the trial
court’s finding that the decedent believed that she and James were still
married. Id. at 31. She further argues that no evidence established that the
decedent intended for James to share in the proceeds of the credit union
accounts while James and Appellant were married. Id. at 31-32. Appellant
also asserts that the trial court’s determination that the decedent would have
changed the beneficiary designation if he knew about the divorce was “purely
speculative.” Id. at 33.
Appellant further notes that the proper remedy for a violation of her
duties as an agent was a surcharge and not the rescission of the beneficiary
designation of the accounts. Id. at 35. She asserts that any loss caused by
a breach of the POA was too speculative to grant relief and that a rescission
of the beneficiary designation was too severe a remedy. Id. at 37.
It is well settled that “[p]ower of attorney actions are governed by
statute, 20 Pa.C.S.[ §§ 5601-5614 (the POA Act)].” Rellick-Smith, 147 A.3d
at 904. Here, when the decedent executed the POA naming Appellant as his
agent in February of 2014, Appellant’s duties were outlined by the prior
version of Section 5601, which read:
(e) Fiduciary relationship.—An agent acting under a power of
attorney has a fiduciary relationship with the principal. In the
absence of a specific provision to the contrary in the power of
attorney, the fiduciary relationship includes the duty to:
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(1) Exercise the powers for the benefit of the principal.
(2) Keep separate the assets of the principal from those of
an agent.
20 Pa.C.S. § 5601(e)(1)-(2) (subsequently amended eff. Jan. 1, 2015).
The current version of POA Act codifies the 2014 amendments which
became effective January 1, 2015. See 2014, July 2, P.L. 855, No. 95 (Act
95), §§ 3, 9 (eff. Jan. 1, 2015). Currently, Section 5601.3 defines the duties
of an agent as follows:
(a) General rule.—Notwithstanding any provision in the power
of attorney, an agent that has accepted appointment shall:
(1) Act in accordance with the principal’s reasonable
expectations to the extent actually known by the agent
and, otherwise, in the principal’s best interest.
(2) Act in good faith.
* * *
(b) Other duties.—Except as otherwise provided in the power of
attorney, an agent that has accepted appointment shall:
(1) Act loyally for the principal’s benefit.
(1.1) Keep the agent’s funds separate from the principal’s
funds unless:
(i) the funds were not kept separate as of the date of the
execution of the power of attorney; or
(ii) the principal commingles the funds after the date of
the execution of the power of attorney and the agent
is the principal’s spouse.
(2) Act so as not to create a conflict of interest that impairs
the agent’s ability to act impartially in the principal’s
best interest.
(3) Act with the care, competence and diligence ordinarily
exercised by agents in similar circumstances.
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* * *
(6) Attempt to preserve the principal’s estate plan, to the
extent actually known by the agent, if preserving the
plan is consistent with the principal’s best interest based
on all relevant factors, including:
(i) The value and nature of the principal’s property.
(ii) The principal’s foreseeable obligations and need for
maintenance.
(iii) Minimization of taxes, including income, estate,
inheritance, generation-skipping transfer and gift
taxes.
(iv) Eligibility for a benefit, program or assistance under a
statute or regulation.
(c) Nonliability of agent.—
(1) An agent that acts in good faith shall not be liable to a
beneficiary of the principal’s estate plan for failure to
preserve the plan.
(2) An agent that acts with care, competence and diligence
for the best interest of the principal shall not be liable
solely because the agent also benefits from the act or has
an individual or conflicting interest in relation to the
property or affairs of the principal.
20 Pa.C.S. § 5601.3(a), (b)(1)-(3), (6), (c)(1)-(2).4
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4 Section 9 of Act 95 provides:
(1) Except as provided by this section, the provisions of this act
apply to powers of attorney created before, on or after the
respective effective dates of such provisions, but do not apply to
the acts or omissions of agents, or third parties presented with
instructions by agents, that occur before such respective effective
dates.
(2) Except as provided by this section, the provisions of this act
apply to judicial proceedings concerning a power of attorney
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Pennsylvania courts have recognized that
the duty of an agent to his principal is one of loyalty in all matters
affecting the subject of his agency, and the “agent must act with
the utmost good faith in the furtherance and advancements of the
interests of his principal.” This duty is the same as that of
fiduciary which has been described as the duty to act for the
benefit of another as to matters within the scope of the relation.
In re Shahan, 631 A.2d 1298, 1303 (Pa. Super. 1993) (citations omitted).
This Court summarized the following principles governing a breach of a
fiduciary duty in the context of an estate:
“Executors, as well as other fiduciaries, are under an obligation to
make full disclosure to beneficiaries respecting their rights and to
deal with them with utmost fairness.” The Supreme Court has
elaborated accordingly that:
He that is entrusted with the interest of others, cannot be
allowed to make the business an object of interest to
himself; because from the frailty of nature, one who has the
power[ ] will be too readily seized with the inclination to use
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commenced before, on or after the respective effective dates of
such provisions, unless the court finds that application of a
provision of this act would substantially interfere with the effective
conduct of the judicial proceeding or prejudice the rights of a
party, in which case that provision does not apply and the
superseded law applies.
2014, July 2, P.L. 855, No. 95, § 9.
Appellant and the decedent executed the POA in this appeal before Act 95 was
enacted. Therefore, the POA recited the duties listed in former Section
5601(e). Nevertheless, Appellant does not dispute that Act 95 applies.
Appellant, as noted above, expressly relies on the non-liability provision of Act
95 to support her claim that she was entitled to the full amount of the credit
union accounts at the time of the decedent’s death. See Appellant’s Brief at
26.
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the opportunity for serving his own interest at the expense
of others for whom he is entrusted.
Thus, the rule forbidding self-dealing serves both to shield the
estate and its beneficiaries and ensures the propriety of the
executor’s conduct. Consequently, “the rule is inflexible, without
regard to the consideration paid, or the honesty of intent.”
Moreover, a finding of prohibited self-dealing need not be
premised on a showing of loss to the estate:
The test of forbidden self-dealing is whether the fiduciary
had a personal interest in the subject transaction of such a
substantial nature that it might have affected his judgment
in a material connection . . . [T]he fiduciary’s disqualifying
interest need not be such as ‘did affect his judgment’ but
merely such as ‘might affect his judgment.’
In re Estate of Harrison, 745 A.2d 676, 679 (Pa. Super. 2000) (citations
and emphasis omitted).
“[S]urcharge is the penalty for failure to exercise common prudence,
common skill and common caution in the performance of the fiduciary’s duty
and is imposed to compensate beneficiaries for loss caused by the fiduciary’s
want of due care.” In re Estate of Bechtel, 92 A.3d 833, 839 (Pa. Super.
2014) (citation omitted). “Once self-dealing is established, a surcharge may
be applied to a fiduciary, not as compensation for any loss to the estate, but
as punishment for the fiduciary’s improper conduct.” Estate of Harrison,
745 A.2d at 680 (citation omitted).
Instantly, the essence of the trial court’s decision was that Appellant
acted in a manner as to create a conflict of interest that impaired her ability
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to act impartially in the principal’s best interest.5 See Op. on Pet. & Objections
at 8; 20 Pa.C.S. § 5601.3(b)(2). In that regard, we conclude that the record
supports the trial court’s findings of fact. Appellant was aware that she was
the sole beneficiary of the credit union accounts, but under the January 6,
2014 will, was also a one-third beneficiary of the residue of the decedent’s
estate, along with Whitney and James. See Op. on Pet. & Objections at 8;
see also N.T., 12/20/18, at 265, 279, 318.
Appellant permitted the account to grow without consulting with the
decedent as to his precise intention as to his estate. See Op. on Pet. &
Objections at 8; see also N.T. at 173, 183, 314-15. As a notable example,
the proceeds of the sale of the farm and equipment constituted a significant
portion of the decedent’s assets. See Op. on Pet. & Objections at 8. Although
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5 To the extent Appellant argues that that she did not specifically violate a
duty prohibiting the commingling of funds and that her duties under the POA
were ministerial, we agree. See Op. on Pet. & Objections at 7 (noting that
the evidence did not indicate that Appellant was depositing her own income
into the account or improperly transferred funds out of the account).
Furthermore, the findings of the trial court suggest that the decedent
remained competent to arrange his financial affairs even after the sale of the
farm and equipment in 2014. See id. at 4-5. For example, the trial court
found that the decedent instructed Appellant to deposit the proceeds of the
sale of the farm and equipment into the credit union accounts. See id. at 4-
5. We also agree that Appellant did not owe James a direct legal duty under
the POA. Rather, Appellant owed the decedent a duty to attempt to preserve
the decedent’s estate plan. See 20 Pa.C.S. § 5601.3(b)(6). To the extent
Appellant relies on the non-liability provision of the POA Act, we agree with
Appellant that there was no inherent conflict of interest at the time the
decedent initially designated Appellant as the beneficiary of the credit union
accounts. However, as stated above, the trial court’s ultimate finding was
that Appellant was acting under a conflict of interest with respect to the growth
of the accounts.
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the decedent instructed Appellant to deposit the funds, Appellant knew that
she could be entitled to the funds on the decedent’s death and did not question
the decedent’s instructions to deposit the proceeds of the sale of the farm and
equipment. See id.; see also N.T. at 149-50.
As the trial court found, Appellant did not inform the decedent of her
divorce from James. See Op. on Pet. & Objections at 8. Appellant instead
remained silent before, during, and after her divorce even as the credit union
accounts continued to grow. See id. By withholding this information,
Appellant potentially deprived the decedent of the opportunity to make his
own informed decision as to how to allocate his assets. See id. Therefore,
the trial court determined that Appellant was not only impaired by the conflict
of interest, but began “acting in her own best interests.” See id.
Following our review, we conclude that the record supports the trial
court’s finding that Appellant acted in a manner as to create a conflict of
interest under 20 Pa.C.S. § 5601.3(b)(2). See Jackson, 174 A.3d at 23-24.
Furthermore, we find no abuse of discretion or legal error in the trial court’s
determination that Appellant ultimately placed her own self-interests ahead of
those of the decedent. See id. Under these circumstances, we find no basis
to disturb the trial court’s decision to direct Appellant to restore the credit
union accounts to the decedent’s estate for distribution as a surcharge for the
conflict of interest. Cf. Estate of Harrison, 745 A.2d at 680 (discussing a
surcharge as punishment for a fiduciary’s misconduct). Accordingly,
Appellant’s second and third arguments merit no relief.
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Lastly, as to Appellant’s claim that the trial court failed to consider the
MPAA, Appellant contends that absent clear and convincing evidence of the
decedent’s contrary intent, she had a statutory right of survivorship in the
credit union accounts. Id. at 39-40 (discussing 20 Pa.C.S. § 6304(b)).
Appellant concludes that Whitney and James failed to meet the clear and
convincing standard to invalidate her designation as the beneficiary to the
accounts. Id. at 41-45 (discussing In re Novosielski, 992 A.2d 89 (Pa.
2010), In re Estate of Strahsmeier, 54 A.3d 359 (Pa. Super. 2012), and In
re Estate of Cella, 12 A.3d 374 (Pa. Super. 2010)).
The MPAA governs multiple party accounts, which it defines as “either a
joint account or a trust account.” 20 Pa.C.S. § 6301. A “trust account” within
the MPAA means:
[A]n account in the name of one or more parties as trustee for
one or more beneficiaries where the relationship is established by
the form of the account and the deposit agreement with the
financial institution and there is no subject of the trust other than
the sum on deposit in the account; it is not essential that payment
to the beneficiary be mentioned in the deposit agreement. A trust
account does not include a regular trust account under a
testamentary trust or a trust agreement which has significance
apart from the account, or a fiduciary account arising from a
fiduciary relation such as attorney-client.
20 Pa.C.S. § 6301.
The MPAA states the following rules regarding survivorship:
(b) Trust account.—At the death of the trustee or the survivor
of two or more trustees, any sum remaining on deposit belongs to
the person or persons named as beneficiaries, if surviving, or to
the survivor or survivors of them if one or more die before the
trustee or last surviving trustee, unless there is clear and
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convincing evidence of a contrary intent; if two or more
beneficiaries survive, there is no right of survivorship in event of
death of any beneficiary thereafter unless the terms of the account
or deposit agreement expressly provide for survivorship between
them.
(c) Other cases.—In other cases, the death of any party to a
multiple-party account has no effect on beneficial ownership of the
account other than that the rights of the decedent become part of
his estate.
(d) Change by will prohibited.—A right of survivorship arising
from the express terms of an account or under this section, or a
beneficiary designation in a trust account cannot be changed by
will.
20 Pa.C.S. § 6304(b)-(d) (emphasis added). The MPAA directs that the form
of the account at the time of the death of a party will determine the
applicability of Section 6304. 20 Pa.C.S. § 6305.
The MPAA is intended to “reduce certain questions concerning many
forms of joint accounts and the so-called Totten trust account.”6 20 Pa.C.S.
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6 Cf. In re Totten, 71 N.E. 748 (N.Y. 1904). Our Supreme Court described
a Totten trust as follows:
If a person makes a deposit in a savings bank in his own name as
trustee for another person, intending to reserve a power to
withdraw the whole or any part of the deposit at any time during
his lifetime and to use as his own whatever he may withdraw, or
otherwise to revoke the trust, the intended trust is not a
testamentary trust and is enforceable by the beneficiary upon the
death of the depositor as to any part remaining on deposit on his
death if the depositor has not revoked the trust. [I]t is stated: ‘If
a person makes a deposit in a savings bank in his own name ‘as
trustee’ for another person, his intention may be either (1) to
create a revocable trust, (2) to create an irrevocable trust, or (3)
not to create a trust. Evidence may be admitted to show which
was his intention. In the absence of evidence of a different
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§ 6301, cmt. Our Supreme Court has stated that that the MPAA “evidences
a legislative intent that, except when the instrument explicitly provides to the
contrary or in the unusual case based on a heightened degree of evidence,
individuals and institutions may safely rely upon the presumed right of
survivorship of MPAA joint accounts.” Novosielski, 992 A.2d at 102.
Instantly, as noted by the trial court, the decedent designated Appellant
as the beneficiary of the credit union account in February of 2014. However,
there was no indication in the record that the credit union accounts were in
the name of the decedent “as trustee for” Appellant or another beneficiary.
See 20 Pa.C.S. § 6301; cf. Estate of Strahsmeier, 54 A.3d at 360-61, 362
n.14 (discussing trust account listing one of the decedent’s children as “ITF,”
a common abbreviation for “in trust for”).
In any event, to the extent that a designation as a beneficiary alone
creates a trust account within the meaning of the MPAA, the issue resolved by
the trial court was not whether the decedent intended the funds from credit
union accounts to pass directly to Appellant or to his estate. Rather, the
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intention of the depositor, the mere fact that a deposit was made
in a savings bank in the name of a depositor ‘as trustee’ for
another person is sufficient to show an intention to create a
revocable trust. To such a trust the principle stated in this section
is applicable. The depositor may at any time withdraw any part
of the deposit during his lifetime, or otherwise revoke the trust in
whole or in part at any time during his lifetime, or by will, but on
his death the beneficiary is entitled to the amount remaining on
deposit if the depositor has not revoked the trust.
In re Scanlon’s Estate, 169 A. 106, 108 (Pa. 1933).
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principal issue was whether Appellant, who possessed a conflict of interest
under the POA, could be surcharged for a violation of her fiduciary duty. We
note that none of the cases cited by Appellant deal with the precise situation
presented in this appeal. Furthermore, our own research has revealed no case
under which the MPAA precluded the trial court from imposing a surcharge for
a breach of a fiduciary duty.
Therefore, we acknowledge the MPAA’s requirements that the
beneficiary of a trust account be presumptively entitled to the funds from the
account absent the clear and convincing evidence of the decedent’s intent to
the contrary. However, under the unique circumstances of this case, we
conclude that the MPAA did not preclude the trial court from surcharging
Appellant based on a conflict of interest. Because we have found no legal
error in the trial court’s decision to impose the surcharge, we find no merit to
Appellant’s contention that the trial court failed to apply the MPAA.
In sum, we conclude that Appellant is not entitled to relief based on her
claim that the trial court granted relief on a theory not pled by Whitney and
James. Moreover, the trial court’s determination that Appellant acted in a
manner as to raise a conflict of interest was supported by the record and free
of legal error. Lastly, Appellant’s contention that the trial court failed to apply
the MPAA warrants no relief. Therefore, we affirm the order requiring
Appellant to restore the decedent’s checking and savings accounts to his
estate for distribution.
Order affirmed.
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Judge Musmanno joins the memorandum.
Judge Bowes files an concurring statement.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/24/2020
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