J. A20006/14
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
JAN JULIA, EXECUTRIX IN THE ESTATE : IN THE SUPERIOR COURT OF
OF INGRID SOBOLEWSKA, DECEASED, : PENNSYLVANIA
:
Appellant :
:
v. : No. 3323 EDA 2013
:
LORI J. CERATO, ESQUIRE :
Appeal from the Order Dated October 11, 2013,
in the Court of Common Pleas of Monroe County
Civil Division at No. 9653-2012-CV
JAN JULIA, EXECUTRIX IN THE ESTATE : IN THE SUPERIOR COURT OF
OF INGRID SOBOLEWSKA, DECEASED : PENNSYLVANIA
:
v. :
:
LORI J. CERATO, ESQUIRE, : No. 3430 EDA 2013
:
Appellant :
Appeal from the Order Dated October 11, 2013,
in the Court of Common Pleas of Monroe County
Civil Division at No. 9653-2012-CV
BEFORE: FORD ELLIOTT, P.J.E., MUNDY AND MUSMANNO, JJ.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED JANUARY 09, 2015
Jan Julia (“Julia”), the executrix of the Estate of Ingrid Sobolewska
(“the deceased”), appeals the order sustaining, in part, and denying, in part,
Attorney Lori J. Cerato’s Preliminary Objections to a Complaint filed by Julia
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against Cerato as the scrivener of the Will of the deceased. Cerato has filed
a cross-appeal. Finding no error, we affirm.
On May 7, 2008, the deceased executed a will prepared by Cerato.
Therein, the deceased directed that her debts be paid out of her Estate and
that, thereafter, the residue was to be divided among six beneficiaries
according to percentages stated in the Will. Among the decedent’s assets
were an Annuity valued at $175,950.67 and an IRA account valued at
$7,182.06. Unknown to Cerato, the Annuity and the IRA had beneficiary
designations that differed from the testamentary scheme set out in the Will.
Consequently, these assets did not pass to the Estate for distribution under
the Will, but were apparently paid directly to the designated beneficiaries.
Furthermore, the Estate was required to pay inheritance taxes on the
Annuity and the IRA in the amount of $27,469.91 because a provision of the
Will directed the Estate to pay such taxes regardless of whether the
deceased’s assets passed through the Will.
The deceased died on December 1, 2010. On November 16, 2012, in
her capacity as executrix of the Estate only, Julia filed a Complaint against
Cerato.1 The Complaint alleged two counts, one sounding in breach of
contract, the other in legal malpractice, and requested damages in an
amount equaling the sum of the Annuity, the IRA, and the inheritance taxes.
1
Julia is also a beneficiary under the Will.
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On December 18, 2012, Cerato filed Preliminary Objections in the
nature of a demurrer to the Complaint. On September 16, 2013, the trial
court entered an order overruling the Preliminary Objections as to the
breach of contract count and sustaining, in part, and overruling, in part, the
Preliminary Objections as to the legal malpractice count, allowing Julia to
seek recovery on that count as to the inheritance taxes paid by the Estate.
The legal basis stated by the court cited Guy v. Liederbach, 459 A.2d 744
(Pa. 1983) (plurality), for the proposition that the representative of an
estate cannot maintain a legal malpractice action based upon a failed legacy
because the estate was not harmed. The court found, however, that the
Estate was harmed as to the payment of inheritance taxes. Upon motion for
reconsideration by both parties, on October 15, 2013, the court entered an
order (dated October 11, 2013) revising its original holding. In this order,
the trial court sustained, in part, and overruled, in part, the Preliminary
Objections as to the breach of contract count also, extending its limitation to
recovery for inheritance taxes only, apparently on the dictates of Guy.
On November 1, 2013, Julia moved to amend and certify the order
dated October 11, 2013, for immediate appeal. On November 13, 2013, the
court certified its order for appeal. Julia filed her notice of appeal on
November 25, 2013, and Cerato filed her notice of cross-appeal on
December 13, 2013.
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On appeal, Julia purports to raise 13 separate issues. However, upon
closer review, all of Julia’s issues go to the propriety of applying Guy to her
Complaint such that her causes of action are not sustainable as to the
Annuity and the IRA. Cerato, on the other hand, argues that under Guy,
Julia cannot maintain her causes of action as to the inheritance taxes either.
We begin our analysis with our standard of review:
The standard of review we apply when
reviewing a trial court’s order granting preliminary
objections in the nature of a demurrer is as follows:
Our standard of review of an order of the
trial court overruling or granting
preliminary objections is to determine
whether the trial court committed an
error of law. When considering the
appropriateness of a ruling on
preliminary objections, the appellate
court must apply the same standard as
the trial court.
Preliminary objections in the
nature of a demurrer test the legal
sufficiency of the complaint. When
considering preliminary objections, all
material facts set forth in the challenged
pleadings are admitted as true, as well
as all inferences reasonably deducible
therefrom. Preliminary objections which
seek the dismissal of a cause of action
should be sustained only in cases in
which it is clear and free from doubt that
the pleader will be unable to prove facts
legally sufficient to establish the right to
relief. If any doubt exists as to whether
a demurrer should be sustained, it
should be resolved in favor of overruling
the preliminary objections.
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Liberty Mutual Insurance Co. v. Domtar Paper Co., 77 A.3d 1282, 1285
(Pa.Super. 2013), appeal granted in part, 92 A.3d 809 (Pa. 2014),
quoting Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa.Super. 2011).2
Preliminarily, we find that although Julia’s original Complaint purported
to raise a breach of contract claim as well as a legal malpractice claim, the
Complaint actually sounded in legal malpractice only.
In general, courts are cautious about
permitting tort recovery based on contractual
breaches. See Glazer v. Chandler, 414 Pa. 304,
308, 200 A.2d 416, 418 (1964); Bash v. Bell
Telephone Company of Pennsylvania, 411
Pa.Super. 347, 601 A.2d 825 (1992). In keeping
with this principle, this Court has recognized the
“gist of the action” doctrine, which operates to
preclude a plaintiff from re-casting ordinary breach
of contract claims into tort claims. eToll, Inc. v.
Elias/Savion Advertising, Inc., 811 A.2d 10, 14
(Pa.Super.2002). The conceptual distinction
between a breach of contract claim and a tort claim
has been explained as follows:
Although they derive from a common
origin, distinct differences between civil
actions for tort and contractual breach
have been developed at common law.
Tort actions lie for breaches of duties
imposed by law as a matter of social
policy, while contract actions lie only for
breaches of duties imposed by mutual
consensus agreements between
particular individuals . . . . To permit a
promisee to sue his promisor in tort for
2
Julia argues in her brief that in a contract action, preliminary objections in
the nature of a demurrer are an improper method to challenge an incorrect
allegation of damages. (Julia’s brief at 20-21.) This argument was not
raised in the concise statement of matters complained of on appeal;
consequently, it is waived.
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breaches of contract inter se would
erode the usual rules of contractual
recovery and inject confusion into our
well-settled forms of actions.
Id. (quoting Bash, supra at 829). However, a
breach of contract may give rise to an actionable tort
where the wrong ascribed to the defendant is the
gist of the action, the contract being collateral. Id.
“The important difference between contract and tort
claims is that the latter lie from the breach of duties
imposed as a matter of social policy while the former
lie from the breach of duties imposed by mutual
consensus.” Id. (quoting Redevelopment Auth.
v. International Ins. Co., 454 Pa.Super. 374, 685
A.2d 581, 590 (1996) (en banc), appeal denied,
548 Pa. 649, 695 A.2d 787 (1997)). “In other
words, a claim should be limited to a contract claim
when the parties’ obligations are defined by the
terms of the contracts, and not by the larger social
policies embodied by the law of torts.” Id. (quoting
Bohler-Uddeholm Am., Inc. v. Ellwood Group,
Inc., 247 F.3d 79, 104 (3rd Cir.Pa.2001), cert
denied, 534 U.S. 1162, 122 S.Ct. 1173, 152 L.Ed.2d
116 (2002)).
Pittsburgh Construction Co. v. Griffith, 834 A.2d 572, 581-582
(Pa.Super. 2003), appeal denied, 852 A.2d 313 (Pa. 2004).
A review of the Complaint’s averments under the purported breach of
contract claim readily reveals that the allegations do not arise from the
breach of any of the terms of the alleged agreement between the parties,
but rather from Cerato’s negligent preparation of the Will:
27. Attorney Cerato breached her express and
implied contractual obligations to Decedent
and failed to meet her professional
responsibilities to Decedent in the following
respects.
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a. Attorney Cerato failed to outline
the scope of Attorney Cerato’s
services to Decedent in a written
engagement agreement and/or
written contract.
b. Attorney Cerato failed to ascertain
the assets and nature of assets of
Decedent by a reasonably prepared
questionnaire which was to be
completed by Ingrid prior to
Attorney Cerato’s preparation of
Ingrid’s Will.
c. Attorney Cerato failed to ascertain
the exact nature of, and manner in
which, Decedent owned her various
assets.
d. Attorney Cerato induced Ingrid to
believe that all of Ingrid’s assets at
the time of Decedent’s death would
be transferred in accordance with
the wishes expressed in Decedent’s
Will when rudimentary
investigation would have revealed
that the non-probate assets
identified in paragraph 24 of the
Complaint would not pass in
accordance with the provisions of
the Will.
e. As a direct result of Attorney
Cerato’s failure to meet her
express and/or implied contractual
obligations to Decedent and
provide professional services of a
quality which should have been
provided to Ingrid, assets owned
by Decedent at her death which
Decedent anticipated would be
assets of, and received into,
Decedent’s Estate by her Executrix
and distributed in accordance with
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Ingrid’s desires expressed in the
Will were not assets of, and
received by, the Estate or the
Executrix and were not distributed
in accordance with Ingrid’s desires
expressed in Decedent’s Will.
f. As a direct result of Attorney
Cerato’s failure to meet her
express and/or implied contractual
obligations and provide
professional services of a quality
which should have been provided,
the Executrix was required to pay
inheritance taxes from Decedent’s
Estate in the amount of
$27,469.91, based upon the 15%
inheritance tax rate imposed by the
Pennsylvania Department of
Revenue, on the transfer of the
Annuity or proceeds of the Annuity
in the amount of $175,950.67 and
on the transfer of the IRA or
proceeds of the IRA in the amount
of $7,182.06, which payment by
the Estate was mandated because
Section SECOND of the Will
required the residue of the Estate
to pay all death taxes.
Complaint, 11/16/12 at paragraph 27, a through f.
None of these alleged failures by Cerato stems from the failure to
adhere to any of the terms of any agreement between the parties, but
instead arise from a breach of a duty of care, which is the heart of a
negligence claim. Moreover, the central and crucial allegation, listed at
Paragraph 27 c., the failure of Cerato to ascertain the exact nature of, and
manner in which, the decedent owned her various assets, is plainly and
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purely an averment pertaining to negligence and not to breach of contract.
Consequently, as a preliminary matter, we regard Julia’s Complaint as
raising a claim of legal malpractice only. That being stated, the law is clear
that the executrix of an estate cannot bring a legal malpractice action
against the scrivener of a will which results in a failed legacy.
We therefore turn to the question of whether
the estate could sue the drafting attorney for
malpractice and receive damages for the failure of
the instrument to effectuate testator’s intent. In any
cause of action for malpractice, some harm must be
shown to have occurred to the person bringing suit.
In the case of a failed legacy, the estate is not
harmed in any way. California, the first state to find
a cause of action in malpractice for beneficiaries has
held that the executor has no standing to bring an
action.
Indeed, the executor of an estate has no
standing to bring an action for the
amount of the bequest against an
attorney who negligently prepared the
estate plan, since in the normal case the
estate is not injured by such negligence
except to the extent of the fees paid;
only the beneficiaries suffer the real loss.
Heyer v. Flaig, 70 Cal.2d 223, 228, 449 P.2d 161,
165, 74 Cal.Rptr. 225, 229 (1969). Even if the
estate would have standing to bring the suit, the fact
that no harm had occurred to it and the estate has
nothing to gain would remove any incentive for suit.
Guy, 459 A.2d at 749.
Julia attempts to characterize this language as mere dicta. (Julia’s
brief at 20.) We disagree. Guy involved the beneficiary under a will suing
the attorney scrivener of the will over a failed legacy attributable to the
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attorney’s malpractice. The Guy court decided to allow beneficiaries of such
failed legacies to bring suit against the attorney scrivener under a third party
beneficiary theory because relief by suit brought by the estate was
unavailable.3 Thus, the holding in Guy that the representative of an estate
cannot maintain a legal malpractice action over a failed legacy was vital to
the court’s ultimate ruling. The language is not dicta.
We reject Julia’s various other arguments. Julia contends that the
language, “[e]ven if the estate would have standing to bring the suit, the
fact that no harm had occurred to it and the estate has nothing to gain
would remove any incentive for suit,” implies that the personal
representative does have standing to sue if the representative chooses to do
so. (Julia’s brief at 20.) We find no such implication. The statement is
merely a hypothetical reason why granting third party beneficiaries the right
to bring suit might be appropriate even if the personal representative had
standing to sue. The clear implication is that the personal representative
does not have standing.
We find no merit in Julia’s public policy argument that it is burdensome
to require each beneficiary to bring suit rather than allowing the executrix to
bring a single action. Multiple actions filed by multiple beneficiaries could
3
“[W]e nevertheless feel that a properly restricted cause of action for third
party beneficiaries in accord with the principles of Restatement (Second) of
Contracts § 302 (1979) is available to named legatees, such as appellee,
who would otherwise have no recourse for failed legacies which result from
attorney malpractice.” Guy, 459 A.2d at 746 (emphasis added).
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simply be joined and tried at a single trial. Undoubtedly, that is precisely
what the attorney defendant would seek to avoid unnecessary time and
expense. We also see no merit in Julia’s contention that permitting the
executrix to bring a malpractice action facilitates public policy by increasing
the likelihood that lawyers will be held responsible for their malpractice.
Rather, we find that interested beneficiaries are more likely to pursue legal
action than the personal representative who may be disinterested.4
In sum, we agree with the trial court that Julia cannot, as executrix,
maintain a legal malpractice action against Cerato based upon the failed
legacies involving the Annuity and the IRA. However, the overpayment of
inheritance taxes has directly damaged the Estate and will sustain a legal
malpractice action.
The Complaint states that the inheritance taxes on the Annuity and the
IRA were calculated at the standard 15% rate. (Complaint, 11/16/12 at
paragraph 24.) However, if the Annuity and the IRA had passed through the
Estate to the designated beneficiaries, a lesser inheritance tax would have
resulted. Four of the six beneficiaries listed in the Will appear to be
charitable takers. Pennsylvania exempts charitable bequests from
inheritance tax. 72 P.S. § 9111(c)(1). Furthermore, it is possible that the
remaining two beneficiaries might also qualify for a lower inheritance tax
4
Instantly, it happens that the executrix is also a beneficiary and is,
therefore, interested.
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rate. Pennsylvania calculates inheritance taxes at a lesser rate for
beneficiaries who have a certain familial relationship with the deceased. For
instance, for a child of the deceased the tax rate is 4.5%, and for a sibling of
the deceased, 12%. 72 P.S. § 9116(a)(1) and (a)(1.3), respectively. The
remaining two beneficiaries in the Will are Julia and an individual named
Susan Robinson. The Will does not reveal if either of these persons are
children or siblings of the deceased, but if they are, a lower inheritance tax
would apply. Consequently, taking the averments of the Complaint as true,
as our standard of review requires, we find that Julia and the Estate have
made out a valid action for legal malpractice based upon the overpayment of
inheritance taxes which, unlike the failed legacies, directly harmed the
Estate. This case can go forward as to the inheritance taxes only.
Accordingly, we will affirm the order of the trial court and remand this
case for further proceedings.
Order affirmed. Case remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/9/2015
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