J-A19036-20
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
ESTATE OF: NANCY STAPLER-ELIAS, : IN THE SUPERIOR COURT OF A INCAPACITATED PERSON : PENNSYLVANIA : : APPEAL OF: NANCY STAPLER-ELIAS : : : : : No. 2345 EDA 2019
Appeal from the Order Dated July 18, 2019 In the Court of Common Pleas of Montgomery County Orphans’ Court at No(s): No. 2007-X0577
ESTATE OF: NANCY STAPLER-ELIAS, : IN THE SUPERIOR COURT OF AN ALLEGED INCAPACITATED : PENNSYLVANIA PERSON : : : APPEAL OF: NANCY STAPLER-ELIAS : : : : No. 2346 EDA 2019
Appeal from the Order Entered July 15, 2019 In the Court of Common Pleas of Montgomery County Orphans’ Court at No(s): No. 2007-X0577
BEFORE: PANELLA, P.J., McLAUGHLIN, J., and McCAFFERY, J.
MEMORANDUM BY McCAFFERY, J.: FILED OCTOBER 14, 2020
In these consolidated appeals,1 Nancy Stapler-Elias (Appellant) appeals
from the July 15, 2019, order entered in Montgomery County Court of
Common Pleas, Orphans’ Court, ruling on objections she made to the First and
Final Account made by Naomi Fenlin (Appellee), the appointed guardian of
1 See Superior Court Order, 9/10/19 (sua sponte consolidating appeals). J-A19036-20
Appellant’s estate during a period in which she was totally incapacitated.
Appellant also appeals from the trial court’s July 18, 2019, order denying her
petition for payment of fees and costs. We affirm. The trial court summarized
this matter’s procedural history as follows:
The First and Final Account of [Appellee, sister and] former Guardian of [Appellant], an Incapacitated Person, was called for audit on August 7, 2017. Objections were filed on July 17, 2017 by [Appellant], a formerly incapacitated person. This court heard evidence with regard to these objections during a two day hearing on June 26, 2018 and June 28, 2018 . . . .
* * *
The Account is filed in accordance with this court’s Order dated March 28, 2017 which directed the guardian to file an account of her administration. The guardianship terminated following this court’s Order dated April 9, 2015 which declared [Appellant] was no longer adjudicated an incapacitated person.
The First and Final Account is stated from March 30, 2007 to April 9, 2015. Therein, [Appellee] reports receipts of $2,584,960.78, since increased by a net gain of $353,986.50[,] since reduced by a net loss of $0 on principal conversions, since reduced by disbursements of $850,141.49, and by distributions for the benefit of [Appellant] or her creditors [of] $0.00, leaving a balance of $2,088,805.39, held as described on pages 8 and 44 of the First and Final Account. No assets remain in the guardian’s account as the assets have been returned to [Appellant] following the Court’s April 9, 2015 Order.
All parties having or claiming any interest in the Guardianship Estate, of whom the Accountant has notice, are said to have received written notice of the audit, by letter dated June 26, 2017, in conformity with the Rules of Court.
Background
On March 30, 2007, the court determined [Appellant] to be an incapacitated person. Her sister, [Appellee,] was appointed
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Plenary Permanent Guardian of [Appellant’s] estate and person and posted bond in the amount of $250,000.00.
Prior to her period of incapacity, [Appellant] had obtained an undergraduate degree from Temple University in 1975. She then earned a law degree from Temple Law School in 1978 and became licensed to practice law in Pennsylvania. Her first job after finishing law school was in-house counsel with First Pennsylvania Bank where she worked until 1982. Thereafter she worked in the financial services industry until approximately 2005.
[Appellee] testified that when she began her guardianship, her sister was in a catatonic state. She continued as guardian for her sister until 2015 when [Appellant] returned to being a functioning, talking, thinking, active person again. During this time period, the value of [Appellant’s] estate grew.
Following a review hearing, as well as a hearing on [Appellee’s] petition to resign and several petitions for counsel fees, on April 9, 2015 the court determined that [Appellant] was no longer incapacitated. Accordingly, the March 30, 2007 order addressing the incapacity and related appointments was vacated.
On February 22, [2017, Appellant] filed a Petition seeking an accounting of [Appellee’s] estate administration during [Appellee’s] tenure as Guardian of the Estate. The court granted the Petition on March 28, 2017. An accounting was filed with the court on June 27, 2017. Objections to the accounting were filed by [Appellant] on July 17, 2017.
The court conducted a hearing over the course of two days, June 26 and June 28, 2018, to address objections to the accounting. At the start of trial, Counsel for [Appellant] withdrew 18 of the 32 objections. Counsel then categorized the remaining objections into three categories:
(1) Loss of investment income . . . the failure of [Appellee] to hire a financial advisor . . . and failure to report financial assets in principal balance of account . . . ;
(2) Former incapacitated person’s personal property items destroyed or lost . . . ;
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(3) [Appellee] imprudently spent estate funds in violation of her fiduciary duty . . . .
[Appellant] maintains that due to [Appellee’s] mismanagement, the estate should not pay her counsel fees, nor her court and litigation costs . . . .
Trial Ct. Op., 7/16/19, at 1-3 (citations and footnotes omitted). During
Appellee’s stewardship, Appellant’s estate grew to $2,088,805.29.2 Id. at 2.
At the close of proceedings in the trial court, the court entered the two
orders under review, an order of July 15, 2019, disposing of Appellant’s
objections, and an order of July 18, 2019, denying Appellant’s petition for
payment of fees and costs. The trial court granted Appellant’s objections
relating to funds kept in a checking account rather than invested (awarding
$2,000 in lost interest), handling of the sale of a used car ($5,000), and
disposal of a fur coat ($1,000). See Trial Ct. Op. at 6, 8, 10. The trial court
also granted an objection as to a $972 late enrollment insurance fee and
denied Appellee’s petition for payment of fees and costs. Id. at 13.
Otherwise, the trial court overruled Appellant’s objections. The trial court
concluded that Appellee, “as guardian of [Appellant’s] estate, on the whole
managed the formerly incapacitated person’s estate with due care.” Id. at 4.
This Court has stated:
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
2 Appellee’s initial inventory listed the gross value of the estate as $1,302,746.39. Petition of Guardian for Leave to Resign Guardianship, 12/11/14, at 2 n.1.
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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 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).
In her brief, Appellant outlines the questions presented as follows:
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1. Did the Trial Court err by not surcharging [Appellee] who significantly damaged the Estate by failing to follow the explicit direction from the Orphans’ Court and develop a plan or implement an investment strategy for more than three years?
2. Did the Trial Court err by finding that [Appellee] fulfilled her fiduciary duty merely by giving a portion of her ward’s assets to a financial institution, when [Appellee] failed to provide adequate information and investment objectives to that institution and then failed to monitor the assets’ performance?
3. Did the Trial Court err by finding that withdrawal of one objection to an accounting, concerning student loans in [Appellant’s] name, resulted in the waiver of a different objection, concerning different loans in [Appellant’s] daughter’s name, which [Appellee] paid without court approval?
4. Did the Trial Court err by failing to shift the burden of proof to [Appellee], when [Appellee’s] breaches of duty were patent, and, as a matter of law, [Appellee] was required to present exculpatory evidence to avoid a surcharge?
5. Did the Trial Court err in finding that the $30,000 [Appellant] entrusted to [Appellee] for her care shortly before the Guardianship began fell outside the Trial Court’s authority?
6. Did the Trial Court err in failing to award attorneys’ fees, litigation costs and interest on the amount surcharged?
Appellant’s Brief at 2-3. Appellant argues that Appellee failed to marshal
Appellant’s assets, prepare a budget, and diversify investments, and Appellant
characterizes these alleged lapses as a violation of fiduciary duty. Appellant’s
Brief at 27. She claims Appellee’s conduct violated the Prudent Investor Rule,
20 Pa.C.S. § 7203, which requires that fiduciaries invest and manage trust
assets as a prudent investor would, taking into account trust features, goals,
and needs, with an investment strategy that reasonably suits the trust. Id.
She also reiterates a number of factual claims disposed of by the trial court,
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and asks this Court to award counsel fees and costs. Id. at 28. She seeks a
surcharge for Appellee’s alleged failures to implement an investment strategy,
and to engage sufficiently with a financial institution managing estate
investments. Id. at 2. She also argues that the trial court erred in finding
waiver of an objection relating to Appellant’s daughter’s college loans, in
failing to shift the burden of proof, in finding that moneys entrusted to
Appellee prior to the guardianship fell outside its authority under the estate,
and in denying fees and costs. Id. at 2-3. In total, she demands
$1,176,295.65 plus interest. Id.at 60.
Appellee argues that although she took stewardship of her sister’s assets
during a historical economic crisis, she nevertheless exercised common
prudence, skill, and caution as required by In re Lentz’ Estate, 72 A.2d. 276
(Pa. 1950). Appellee’s Brief at 18, citing In re Lentz’ Estate, 72 A.2d at 278.
She asks that this Court not disturb the trial court’s well-reasoned disposition.
Id. at 41-42.
A fiduciary must “take custody of the estate and . . . administer it so as
to preserve and protect the property for distribution to the proper persons
within a reasonable time . . . [and] will be required to exercise the same
degree of judgment, skill, care, and diligence that a reasonable or prudent
person would ordinarily exercise in the management of his or her own affairs.”
Matter of Estate of Campbell, 692 A.2d 1098, 1101–02 (Pa. Super. 1997)
(citations omitted). Surcharges may be imposed to compensate beneficiaries
for losses incurred where a fiduciary deviates from the standard of ordinary
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care, but not for mere errors in judgment. In re Miller’s Estate, 26 A.2d
320, 321 (Pa. 1942). Therefore, a breach of duty that does not cause a loss
should not occasion a surcharge. In re Estate of Warden, 2 A.3d 565, 573
(Pa. Super. 2010).
We analyze Appellant’s several claims of error seriatim.
1. Assets Uninvested During Recession
Appellant claims that the trial court erred in concluding that Appellee’s
“action in wanting to preserve estate assets by leaving them ‘as is’ [was]
reasonable.” Appellant’s Brief at 34, citing Trial Ct. Op. at 6. Approximately
$900,000 was kept in a checking account from November of 2009 to May of
2010, after which the funds were managed by Morgan Stanley. Trial Ct. Op.
at 5.
The trial court credited Appellee’s testimony that she was concerned
about the economy and wanted to “do what [she] thought was safe” during
that period. Trial Ct. Op. at 5. Experts for both parties testified that the
market was markedly bearish at the time. Id. Given the limited time during
which this money was left uninvested and the volatility of the market, we
cannot find an abuse of discretion here.
Similarly, approximately $102,000 was kept in a checking account for
three and a half years. Trial Ct. Op. at 6. This was an operating account, and
the trial court granted Appellant’s objection and awarded $2,000, finding that
a certificate of deposit would have been an appropriate way to handle the
funds. Id. Nevertheless, Appellant argues that this is insufficient. We
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disagree. Because it was an operating account, any reasonable investment
strategy would have been unlikely to yield significant income because that is
not the primary purpose of an operating account. Appellant was severely ill
during this period, and her medical needs and expenses could have escalated
at any point. We cannot in hindsight say that she should have known this
would not happen. There is no abuse of discretion here.
Appellant also faults Appellee’s handling of Appellant’s own investments
in her 401(k) account, pension plan, and Bank of America stock. Appellant’s
Brief at 17. Appellant claims that the trial court did not take into account that
she had been ill for two years before the guardianship was created, “so that
the assets as initially received no longer represented a carefully considered
composition of assets by a financially capable person[.]” Id. at 34. However,
Appellant does not cite any allegedly unsound decisions Appellant herself
made during those two years. The trial court was in the best position to gauge
how the financial crisis impacted the early period of Appellee’s financial
stewardship, and we can find no abuse of discretion in its conclusions here.
2. Morgan Stanley Investments
Appellant argues that Appellee’s employment of Morgan Stanley to
handle the $900,000 was also inappropriate, and its handling of that money
and her IRA damaged the estate “in an amount ranging from $224,097 to
$493,826.” Appellant’s Brief at 18. Appellant claims that Appellee selected
inappropriate investment goals and failed to monitor Morgan Stanley’s
handling of the assets. Id. The gravamen of her complaint seems to be that
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Appellee told Morgan Stanley that income should be a primary objective, but
ultimately, during the guardianship, Appellant’s income exceeded her
expenses and thus she did not need income. Id. at 37 (“What [Appellant] did
need (and still needs now) was principal growth to provide a nest egg[.]”).
Although the assets placed with Morgan Stanley appreciated in value,
Appellant believes they should have appreciated at a greater rate. Id. at 40.
This argument strikes the Court as a classic case of hindsight. Investing
is always risky and imprecise, and Appellant’s medical situation similarly held
the potential for serious volatility. Thus, income-generation was not an
unreasonable or imprudent goal. The trial court did not abuse its discretion
in denying Appellant’s objections as to these investments.
3. College Loans – Waiver
Appellant claims that the trial court erred in finding that Appellant’s
withdrawal of an objection waived another objection pertaining to bonds that
Appellee cashed in to pay off student loans in Appellant’s daughter’s name.
Appellant withdrew an objection pertaining to loans for her daughter’s
education that were taken in Appellant’s own name, as it appears they will be
discharged. Appellant’s Brief at 41; Trial Ct. Op. at 6-7. Appellant seeks
$43,008 plus interest for three bonds that Appellee used to pay Appellant’s
daughter’s college loans. Appellant’s Brief at 42. The bonds were co-owned
by Appellant’s daughter, as they had been issued in both Appellant’s name
and her daughter’s name. Appellee’s Brief at 30.
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The trial court was in the best position, as factfinder, to weigh whether
Appellant’s withdrawal of objections waived this claim. Appellant’s brief does
not establish an abuse of discretion sufficient to set aside the trial court’s
finding.
4. Burden-Shifting
Appellant claims the trial court erred in failing to shift the burden of
proof to Appellee. Appellant argues that she has established significant
discrepancy and patent error. In re Maurice’s Estate, 249 A.2d 334 (Pa.
1969), establishes that “those who seek to surcharge a fiduciary for breach of
trust must bear the burden of proving the particulars of his wrongful conduct.”
Id. at 336. However, where a “glaring error in overpayment of tax [was]
shown, it was the burden of the Executor to come forward with evidence to
prove that . . . it used common skill, prudence and due care under the
circumstances.” Id. Appellant claims she has established “numerous, glaring,
facially-apparent breaches of fiduciary duty” and therefore the trial court erred
in failing to shift the burden to Appellee to defend her performance.
Appellant’s Brief at 43.
Appellant’s complaints in this regard fall in two categories: personal
property, and medical insurance. Appellant’s Brief at 44-53. Appellant claims
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that “instead of safeguarding [Appellant’s] belongings, she destroyed them.”3
Id. at 44. She claims losses of $191,627.14. Id. at 47.
The trial court surcharged Appellee $5,000 for a Honda vehicle that was
sold because Appellant’s daughter did not want it; had she not sold it, it would
have lay fallow as it inevitably depreciated in value. Appellee admitted that
she did not account for the $5,000 properly, and says she learned to be more
detailed because of the error. Trial Ct. Op. at 8. The trial court also imposed
a surcharge of $1,000 for a fur coat that Appellee discarded. Id. at 10.
Based on its credibility determinations and testimony that significant
amounts of the personal property Appellant claims are gone are actually in
her daughter’s possession, and on the paucity of evidence Appellant
presented, the trial court denied the remaining objections as to personal
property. Trial Ct. Op. at 9-10. The trial court’s findings, which are inevitably
heavily influenced by the credibility and consistency of testimony at trial, do
not appear to this Court to be an abuse of discretion. We have no doubt that,
if Appellee had preserved Appellant’s apartment in an “as is” condition, paying
rent for an uninhabited home while also paying for Appellant’s residence in a
care facility, Appellant would find that to be a deviation from the standard of
prudent care to which fiduciaries must be held. Contrary to Appellant’s
somewhat hyperbolic assertions that “everything she had earned [has been]
3 Appellant claims that she “is like the victim of a flood with everything that she had earned, been gifted, collected and treasured, forever washed away.” Appellant’s Brief at 44.
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forever washed away,” see Appellant’s Brief at 44, it appears that the more
apparently high-value property was kept for her, whereas larger, less valuable
pieces of property were either given to Appellant’s daughter or discarded. See
Trial Ct. Op. at 9-10. We will not disturb the trial court’s findings.
Appellant argues that Appellee’s failure to enroll Appellant in Medicare
Part D and payment for insurance through Blue Cross (which she characterizes
as “unnecessarily duplicative”), combined with other insurance decisions, cost
the estate $53,291 plus interest. Appellant’s Brief at 51, 53. The trial
court noted its disapproval of Appellee’s failure to purchase Medicare
supplemental insurance for Appellant from November 2010 to April 2015.
Trial Ct. Op. at 12. The trial court also imposed a surcharge of $972 for a late
enrollment fee the estate sustained. Id. at 13. However, Appellant did not
provide credible evidence as to supposed losses due to prescription drug
coverage. Id.
Again, because the trial court was in the best position as factfinder to
weigh these considerations, we apply the abuse of discretion standard;
although Appellant claims “[Appellee’s] breaches of such basic obligations
shock the conscience[,]”we disagree. See Appellant’s Brief at 53. Appellee’s
handling of certain aspects of Appellant’s insurance regime was less than ideal,
but it is readily apparent that, for the most part, she sought reliable insurance
and good care for Appellant. Medical insurance is complex, and we will not
reach behind the trial court’s able handling of the facts here.
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5. Pre-Guardianship Funds
Appellant’s claim as to the $30,000 that passed from Appellant to
Appellee prior to the creation of the estate, a claim which is unsupported by
any legal authority, fails for the reason the trial court identified: Appellant
herself acknowledged that prior to her loss of capacity, she gave the money
to Appellee. See Trial Ct. Op. at 7. Thus, it falls outside the Estate and is not
part of its accounting, nor the court system’s supervision thereof. Appellee
correctly points out that “[t]o hold otherwise would expand the accounting
period to an indefinite and indefinable term.” Appellee’s Brief at 36. This
claim fails.
6. Fees, Costs, and Interest
Appellant faults the trial court for denying her request for $166,293.51
for counsels’ fees and costs. Appellant’s Brief at 55-60. She also seeks
interest on the surcharges imposed by the trial court. Id. at 60.
Appellant cites In re Kline’s Estate, 124 A. 280 (Pa. 1924), which held
that “[t]he audit was necessary because of the fault of the trustee: hence the
latter and not the estate must bear the cost thereof.” See id. at 283.
Appellant also cites a Common Pleas opinion for the proposition that “the
orphans’ court, as a court of equity, has always had the power to surcharge a
party for counsel fees when it is apparent that the conduct of a party has been
the cause of additional legal expenses.” Appellant’s Brief at 57, citing In re
Rosenfeld Found. Tr., Phila. O.C. 1664 IV 2002, 2006 WL 3040020, at *40
(Pa. Com. Pl. July 31, 2006) (citation omitted). In that case, “it was the
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obdurate refusal of the [trustees] to perform their duties . . . that necessitated
the prolonged litigation.” Id.
The trial court denied fees and costs to both parties. Trial Ct. Op. at 13;
Order, 7/18/19 (denying Appellant’s petition for counsel fees and costs).
Appellee points out that, despite Appellant’s several objections, the trial court
ultimately awarded Appellant an amount constituting less than one percent of
what she sought. Appellee’s Brief at 40-41. Given this award, and given the
apparent sweeping scope of Appellant’s objections and her appellate litigation
strategy, we cannot upset the trial court’s inherent recognition that it was not
Appellee who “necessitated the prolonged litigation” as in Rosenfeld. See
Rosenfeld, 2006 WL 3040020 at *40.
Finally, Appellant argues that the trial court erred in failing to award
interest. “A personal representative who has committed a breach of duty with
respect to estate assets shall, in the discretion of the court, be liable for
interest, not exceeding the legal rate on such assets.” 4 20 Pa.C.S. § 3544.
This standard affords discretion to the trial court. Appellant’s argument is that
because Appellee committed “blatant and repeated breaches of her fiduciary
duties over eight years” while acting as guardian, she should be surcharged
interest. Appellant’s Brief at 60. However, Appellant has not established an
abuse of discretion, and as such this argument fails.
4This section is applicable to incapacitated persons’ estates via 20 Pa.C.S. § 5533.
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The trial court’s opinion, dated July 15, 2019 and docketed the following
day, thoroughly and ably disposes of Appellant’s claims. Therefore, we affirm
on the basis of its reasoning. See Trial Ct. Op. at 1-14. The filing party shall
attach a copy of the trial court’s opinion to any future filing of the instant
memorandum.
Orders affirmed. Judgment Entered.
Joseph D. Seletyn, Esq. Prothonotary
Date: 10/14/2020
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$850, 141.49, and by distributions for the benefit of the ward or her creditors $0.00, leaving a
balance of $2,088,805.29, held as described on pages 8 and 44 of the First and Final Account.
No assets remain in the guardian's account as the assets have been returned to Ms. Stapler-Elias
following the Court's April 9, 2015 Order.
All parties having or claiming any interest in the Guardianship Estate, of whom the
Accountant has notice, are said to have received written notice of the audit, by letter dated June
26, 2017, in conformity with the Rules of Court.
On March 30, 2007, the court determined Nancy Stapler-Elias ("Petitioner") to be an
incapacitated person. Her sister, Naomi Fenlin ("Respondent") was appointed Plenary
Permanent Guardian of Nancy's estate and person and posted bond in the amount of
$250,000.00.
Prior to her period of incapacity, Petitioner had obtained an undergraduate degree from
Temple University in 1975. She then earned a law degree from Temple Law School in 1978 and
became licensed to practice law in Pennsylvania. Her first job after finishing law school was in-
house counsel with First Pennsylvania Bank where she worked until I 982. Thereafter she
worked in the financial services industry until approximately 2005. NT, 6/26/18, pgs. 142-144.
Respondent testified that when she began her guardianship, her sister was in a catatonic
state. She continued as guardian for her sister until 2015 when Petitioner returned to being a
functioning, talking, thinking, active person again. NT, 6/26/18, pgs. 125-126. During this time
period, the value of Petitioner's estate grew.
Following a review hearing, as well as a hearing on the guardian's petition to resign and
several petitions for counsel fees, on April 9, 2015 the court determined that Petitioner was no
2 2007-X0577.46.3.1.7 Adjudication, Page 3
longer incapacitated. Accordingly, the March 30, 2007 order addressing the incapacity and
related appointments was vacated.
On February 22, 1017, Petitioner filed a Petition seeking an accounting of Respondent's
estate administration during Respondent's tenure as Guardian of the Estate. The court granted
the Petition on March 28, 2017. An accounting was filed with the court on June 27, 2017.
Objections to the accounting were filed by Petitioner on July 17, 2017.
The court conducted a hearing over the course of two days, June 26 and June 28, 2018, to
address objections to the accounting. At the start of trial, Counsel for Petitioner withdrew 18 of
the 32 objections.1 Counsel then categorized the remaining objections into three categories:
(1) Loss of investment income (Objections 9, 12, 14), the failure of Naomi to hire a
financial advisor (Objection 5) and failure to report financial assets in principal balance of
account (Objection 7);
(2) Fonner incapacitated person's personal property items destroyed or lost (Objections
1, 2, 3, 4.)2;
(3) Guardian imprudently spent estate funds in violation of her fiduciary duty (Objections
16, 18, 21, 22).
Objections 29-31 relate to the Petition for Adjudication. Petitioner maintains that due to
the guardian's mismanagement, the estate should not pay her counsel fees, nor her court and
litigation costs (Objection 31 ). Objection 30 alleged that the guardian improperly handled her
daughter's student loan for college (Objection 30), but this objection was later withdrawn during
the course of the hearing. N.T. 6/28/18 pg. 4. This court determined the remaining Objection,
I The following objections were withdrawn: Nos. 6-8, I 0, 11, 13, 15, 17, 19, 20, 21, 23 - 28. NT 6/26/18, pp. 4-5, 117; NT 6/28/18, p.4-5. 2 Objection I states: "Objection to Principal Receipts on page 3 of the Accounting, to the extent that the schedule does not reflect assets that should be included in the Estate." This Objection is DISMISSED as overly general in nature. Petitioner's objections 2, 3 and 4 detail more specific items and are addressed infra.
3 2007-X0577.46.3.1.7 Adjudication, Page 4
#29, to be overbroad and lacking specific details. Accordingly, it is therefore summarily
dismissed.
In the performance of her fiduciary duties, the fiduciary must exercise the "judgment,
skill, care and diligence that a reasonable or prudent person would ordinarily exercise in the
management of his or her own affairs." In re Estate of Campbell, 692 A.2d 1098, 1101-02 (Pa.
Super. 1997). A surcharge is the penalty imposed by the court for the failure of a fiduciary to
meet his duty of care owed his estate. As noted in Miller's Estate, 26 A.2d 320, 321 (1942),
"Surcharge 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." Estate of Stephenson, 364 A.2d 1301, 1306 (Pa.
1976).
A surcharge will not be imposed for mere errors of'judgment, It is imposed to
compensate beneficiaries for loss caused by the fiduciary's want of due care. In re Miller's
Estate, 26 A.2d 320, (Pa. 1942).
However, even if there is a breach of duty, where there is no loss, there is no basis for a
surcharge. In re Estate of Warden, 2 A.3d 565, 573 (Pa. Super. 2010).
A guardian of an incapacitated person's estate shall administer the estate subject to the
prudent investor rule. 20 Pa. C.S. §§ 5521(b); 5145; 7201, et seq.
After review of all credible evidence, this court concludes that Respondent, as guardian
of Petitioner's estate, on the whole managed the formerly incapacitated person's estate with due
care. However, there were instances during the period of her administration where this court
determined a surcharge was necessary. The court's findings follow.
4 2007-X0577.46.3.1.7 Adjudication, Page 5
1) LOSS OF INCOME
Financial Advisor
At the March 30, 2007 hearing where Judge Ott determined the incapacity of Petitioner,
the Respondent under oath admitted that she lacked the capacity to manage Petitioner's assets
but noted her intent to hire a financial advisor to assist her fund management. (EXH P-1, N. T.
3/30/07, pg. 20) While Respondent testified at trial, "I was stepping into this role totally blind"
(N.T. 6/26/18, pg. 47), she also had sufficient notice of her duty "to place idle assets into
productive form" and she had numerous opportunities to implement this duty. N.T. 6/26/18, pgs.
10-11 and N.T. 6/28/18, pg. 37.
Petitioner attributes Respondent's failure to hire a financial advisor as the cause for
several estate account deficits. Specifically, at trial Petitioner notes the foregone interest on
funds in two separate checking accounts: (1) $900,000 in Susquehanna Bank from November 5,
2009 through May 20, 20 JO and (2) $102,000 in Citizens Bank from October 2011 through April
2015. Petitioner also claims the Estate 401(k) account and shares of Bank of America stock all
declined in value due to the absence of a financial planner.
After discussions during April 2010, Respondent hired financial advisor, Morgan Stanley
firm, on May 21, 2010- three years after her appointment. N.T. 6/26/18, pgs. 8-9, 73.
Respondent was reluctant to make financial decisions during a period of financial upheaval: "I
wanted to do what l thought was safe ... reasonable, and ... would safeguard her money." N.T.
6/26/18, pgs. 12, 90. Expert witness for both parties credibly testified that "the market tanked in
2008 and 2009."N.T. 6/28/18, pgs. 33-34, 116-119.
5 2007-X0577.46.3.1.7 Adjudication, Page 6
Given the unstable condition of the financial market, particularly at the beginning of the
Respondent's administration period, this court concludes that Respondent's action in wanting to
preserve estate assets by leaving them "as is" is reasonable. Upon retaining a financial advisor,
the accounts were reallocated in a timely manner and Petitioner's assets grew. Therefore, the
request that Respondent reimburse the estate for unrealized interest income for the 401(k)
account, Bank of America stock shares and the Susquehanna Bank checking account is DENIED
and Objections #5 and #9 are OVERRULED.
Citizens Bank Checking Account
All parties described the Citizens Bank account as an "operating account." However,
Respondent failed to create a budget, which would have guided her fiscal management of estate
operational funds. N .T. 6/26/18, pg. 18. As a result, the operating account maintained a balance
of approximately $102,000 for 3.5 years. If Respondent had created a budget so that she was
aware of estate expenses, the account balance - considering Respondent's trepidation about the
failing financial market- could have conservatively been placed into a bank-sponsored,
federal1y- insured certificate of deposit where it would have earned at least a total of $2,000
during the 3.5 year time period. Accordingly, Objection #12 is SUSTAINED and Respondent is
SURCHARGED $2,000.
Savings Bonds
Petitioner maintains that she gave Respondent U.S. savings bonds that Respondent failed
to include in her accounting (Objection #14). At trial, Petitioner alleged that she gave
Respondent six U.S. savings bonds worth $10,000 each. The objection faults Respondent for
using the proceeds from three of the bonds (redeemed value: $31,752) to pay outstanding student
6 2007-X0577.46.3.1.7 Adjudication, Page 7
loans of Petitioner's daughter, as well as Respondent's failure to note the transaction in her
accounting. NT, 6/26/18, pgs. 119-120. On the second day of trial, counsel for Petitioner
advised the court that claims related to the student loans would not be pursued. N. T. 6/28/18 pg.
4. The court finds that the allegations in Objection #14 related to the student loan debt are
similar to the objections waived on Objection #30. Accordingly, the request to surcharge
Respondent for the value of savings bonds used to pay for student loans is OVERRULED.
Pre-Guardianship Transfer of Funds
Objection #14 also faults Respondent's failure to include in the accounting $30,000 that
Petitioner gave Respondent prior to her illness. Although Respondent was unable to specifically
recall at trial when this transaction occurred (N.T. 6/26/18, pgs. 93-95), Petitioner testified that
she gave Respondent $30,000 "for my needs ... "prior to her hospitalization in September 2006.
Because Respondent's duties as guardian did not exist until the Guardianship was created on
3/30/07, this transaction falls outside the court's authority over the accounting. The request for
surcharge to replace $30,000 is DENIED.
Objection 7, which is an objection to the principal balance on hand for failure to include
Discover Bank CD Account and Countrywide CD Account, is DISMISSED for failure to
present evidence in support of the claim ..
2) PERSONAL PROPERTY
Objection #4 states that the $5,000 proceeds from the sale of the estate vehicle ("Honda")
were not included in the accounting.
Judge Ott, in his July 2, 2007 letter (R-2), authorized Respondent to "gift" the Honda to • •• Petitioner's daughter, reasoning that Petitioner could no longer use the Honda due to her
7 2007-X0577.46.3.1.7 Adjudication, Page 8
incapacity. However, Petitioner's daughter did not want the Honda. As a result, Respondent
sold the car to a family friend for $5,000. ("proceeds")
Because Respondent does not recall where she deposited the proceeds, she included the
funds in the accounting category of "Miscellaneous Unknown Deposits." This accounting
category was created to reflect the surplus of unaccounted-for estate funds. Specifically,
Respondent noted at trial that the proceeds are included in the accounting as part of a deposit that
occurred on December 19, 2007. However, no evidence was introduced substantiating this
assertion.
Respondent admittedly incorrectly listed the Honda in the accounting as a gift to
Petitioner's daughter. N.T. 6/26/18, pg. 66. In fact, the Honda value is listed as zero in the
accounting. The parties stipulated that the proceeds are not listed as a separate asset in the
accounting. In her defense, Respondent contends she didn't know what was required at the time
and claims that she learned to be more detailed as a result of her error.
The court finds that Respondent's explanation regarding the proceeds lacks credibility.
Respondent's role as a business owner is inconsistent with the absent documentation and the
erroneous characterization of the car transfer as a gift. Respondent's handling of the Honda
transaction is a breach of her fiduciary duty. Accordingly, Objection #4 is SUSTAINED and
Respondent is SURCHARGED $5,000.
Petitioner asserts in Objection #2 that "certificates of deposit, stock certificates, bonds
and fine jewelry" stored "in a safe deposit box and/or a locked cabinet" were not included among
the Principal Receipts of the Accounting. Under oath, Petitioner stated that she had a safe
deposit box at the former Fidelity Bank in Dresher, PA but does not recall the last time she
accessed the safe deposit box. Petitioner failed to produce corroborating evidence regarding the
8 2007-X0577.46.3.1.7 Adjudication, Page 9
existence of her safe deposit box and its contents, testifying that her search efforts to locate
documentation regarding the existence of the box were unsuccessful. N.T. 6/26/18 pg. 169.
Due to a lack of corroborating evidence regarding the existence of Petitioner's safe deposit box
and its contents, all objections (#2) related to the alleged contents of the safe deposit box are
OVERRULED.
Respondent's negligent bookkeeping is reflected in her custodial management of estate
personal property and her failure to create an inventory of personal property. Objection #3
claims that Respondent failed to include in the accounting the value of numerous pieces of
jewelry, flatware, collectible art and fur coats, ostensibly valued at approximately $236,000.
However, Petitioner failed to meet her burden of proof to credibly document the existence and
value of personal property items formerly owned by the estate.
Petitioner introduced Exhibit 20 containing a list of jewelry for which receipts were in the
locked file cabinet but the jewelry was allegedly not returned to her. The listing fails to present
corroborating evidence which this court needs to make a sound decision regarding the alleged
missing jewelry. There were no receipts or pictures of any of these items and no credible
independent testimony of a non-interested party to establish the existence and/or value of any of
these items. Furthermore, Petitioner's credibility was impugned by the conflicting evidence she
presented at trial. For example, Petitioner admitted giving Respondent "some of my more
valuable jewelry but not certainly all of it." N.T. 6/26/18 pg. 146. She also claimed that all of
her jewelry was in a locked cabinet: "I kept all of my jewelry in the top drawer of my locked file
cabinet. So, yes, I believe all the jewelry would have been there." N.T. 6/26/18 pg. 173. This r. court also received credible evidence that Petitioner's daughter possessed some of her jewelry.
N.T. 6/26/18 pg. 171 and 6/28/18 pg. 159.
9 2007-X0577.46.3.1.7 Adjudication, Page 10
Respondent however, credibly testified that there was no jewelry in the locked cabinet
when she reviewed the locker contents after it was forcibly opened. More believable is
Respondent's statement that Petitioner gave her a canvas bag of jewelry for safekeeping prior to
the start of guardianship proceedings, and therefore not technically included in the Principle
Receipts section of the Accounting. N.T. 6/26/18, pg. 49.
For similar reasons, the court cannot make a conclusive determination on the issue of
missing furniture and accessories due to Petitioner's failure to present corroborating evidence in
support of her claim as to the existence of such items and their value. Petitioner is unsure of
what her daughter took possession of, other than items observed during a visit to her daughter's
California residence. N.T., 6/26/18, pg. 171. No contradictory evidence was presented to show
that Petitioner's daughter was not the last person to possess Petitioner's furniture.
Petitioner's Exhibit 20 lists a fur coat, initially purchased for $8, 150. Respondent
credibly testified regarding her logic for discarding Petitioner's fur coat, given the small resale
value of fur coats and the cost of appropriate storage for an unknown length of time. N. T.,
6/26/18, pg. 62-63. However, Respondent made no effort to preserve the value of that asset in
some format, such as selling the coat on eBay or Craig's List. Accordingly, Respondent is
SURCHARGED $1,000.00 for the fur coat. All other objections listed in Objection #3 are
OVERRULED for failure to present any credible evidence corroborating their existence or
value.
10 2007-X0577.46.3.1.7 Adjudication, Page 11
3) FIDUCIARY DUTY
Medical Care Insurance Payments
Objections #16 and #18 fault Respondent for using estate funds to pay for medical care
that was already covered by Medicare.
Petitioner became eligible for Medicare in April 2008. Objection #18 contests the
$1,085.84 COBRA payment that Respondent made in April 2008. Respondent credibly testified
that this payment covered medical care for back coverage. N.T. 6/26/18, pg. 116-117. No
contradictory evidence was received. Therefore, Petitioner's request to surcharge Respondent
$1,085.84 is DENIED. Objection 18 is OVERRULED.
Objection #16 contests payments made to Blue Cross Health Insurance after Petitioner
became eligible for Medicare in April 2008. Respondent justifies this purchase as supplemental
insurance for Medicare and maintains it was a continuation of the health insurance Petitioner had
through her employer (via COBRA). N.T. 6/26/18, pg.I 13. Respondent paid approximately
$28,000 in premiums and was reimbursed 18,000, which was reflected in the accounting.
Respondent's payment of approximately $10,000 over the time period between April 2008 and
November 2010 results in a reasonable monthly payment of approximately $300. Respondent
further noted that she received multiple notices from Blue Cross that they were going to drop
Petitioner's PPO coverage and switch her to a health savings account. Respondent credibly
testified that she thought this would make her administration of the estate more difficult without
any added benefit for Petitioner so she decided to drop this coverage. NT, 6/26/18, pgs. 113-116.
Petitioner's request that Respondent be surcharged for the purchase of Medicare supplemental
insurance from April 2008 to November 2010 is DENIED. Objection 16 is OVERRULED.
11 2007-X0577.46.3.1.7 Adjudication, Page 12
At trial, Petitioner's expert witness raised the question of whether Petitioner needed Blue
Cross health insurance as a supplemental policy, noting the inconsistency of adequate medical
insurance coverage throughout the guardianship period. This court shared this observation.
Respondent's testimony indicated Petitioner had no Medicare supplemental coverage from
November 2010 until the guardianship was terminated in April 2015. The court agrees that
Medicare supplemental insurance, be it Medicare Advantage or Blue Cross health insurance, is a
basic necessity, especially when an individual can afford it. Both parties testified similarly
regarding the need for Medicare supplemental insurance. N.T. 6/26/18, pgs. 113 and 161. The
court deeply disapproves of Respondent's failure to provide Medicare supplemental insurance
coverage from November 201 0 to January 2015.
Prescription Drug Payments
Objection #22 charges that, because Respondent applied for Medicare Part D (to cover
payment of medications) during the latter stage of her guardianship, Respondent unnecessarily
paid $69,238.56 for drugs that Medicare Part D would have covered. Due to Respondent's
untimely enrollment, the estate incurred a $972 late enrollment fee.
Petitioner's Exhibit P-27 reflects an alleged loss of $22,538 for the estate. Petitioner's
calculation encompasses the time period of November 2010 through March 2015. At trial,
Petitioner testified that her Medicare Pm1 D and Medicare Advantage began in January 2015.
Petitioner failed to provide credible evidence reflecting the difference between the amount
Respondent paid for drugs and the amount the drugs would have cost under Medicare Part D.
Furthermore, Respondent credibly testified that the costs for medication were high because
Petitioner was not compliant with taking her prescribed pil1s. She had been hiding them in her
cheeks and then hiding them around her room. Doctors later prescribed the liquid form of
12 2007-X0577.46.3.1.7 Adjudication, Page 13
medication but Petitioner was still noncompliant resulting in the use of expensive medical
patches not covered by insurance. NT, 6/26/18, pgs. 117-118. Therefore, Petitioner's request to
surcharge Respondent $22,538 for failing to apply for Medicare Part Dis DENIED.
Due to Respondent's untimely Medicare application, Petitioner's request that Respondent
incur as a surcharge the $972 late enrollment fee is GRANTED. Accordingly, Objection 22 is
SUSTAINED in part and OVERRULED in part.
Payment of Accountant's Counsel Fees, Court & Litigation Costs
In paragraph (c) of the Rider to the Petition for Adjudication, the Accountant/Respondent
requests this court to approve the payment of her counsel fees, costs and filing fees associated
with the filing of this Account. Petitioner filed an objection to this request which is identified as
Objection 31 in the document filed July 17, 2017. Due to Respondent's negligence in managing
Petitioner's estate and her failure to continuously uphold her fiduciary duty, the Petition of
Accountant for Payment of Attorney's Fees and Estate Litigation Costs is DENIED. Objection
#31 is SUST AINED.3
There are no remaining questions before this Court requiring adjudication.
Subject to the views expressed in this Adjudication, to distributions heretofore properly
made, and to any Pennsylvania inheritance transfer tax that may properly be due, the net
ascertained balances of principal and income are awarded as set forth in the last paragraph of the
Petition for Adjudication. this�ay AND NOW, of July, 2019, the First and Final Account is confirmed subject .,,,_ to the findings of the Court herein, and it is hereby ORDERED and DECREED that the
Guardian reimburse the estate for surcharges herein awarded.
3 Counsel fees stated in the First and Final Account are confirmed.
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