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NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
IN RE: JOSEPHINE A. GALLO, AN : IN THE SUPERIOR COURT OF
INCAPACITATED PERSON : PENNSYLVANIA
:
MARGARET GALLO :
:
v. :
:
PETER GALLO, : No. 554 WDA 2018
:
Appellant :
Appeal from the Order, March 28, 2018,
in the Court of Common Pleas of Cambria County
Orphans’ Court Division at No. 11-13-995
BEFORE: OLSON, J., MURRAY, J., AND FORD ELLIOTT, P.J.E.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED FEBRUARY 04, 2019
Peter Gallo appeals the order of the Court of Common Pleas of
Cambria County that surcharged appellant in the amount of $28,715.63
payable to the Estate of Josephine A. Gallo (“decedent”). After careful
review, we affirm.
The background and relevant findings of fact as found and recounted
by the trial court are as follows:
On January 22, 2014, after receiving testimony, the
Court concluded that [decedent] was an
incapacitated person and appointed her son,
[appellant], as the plenary guardian of her Person
and Estate. On January 7, 2015, the Petitioner
herein, Margaret Gallo (“Margaret”) who is the
daughter of [d]ecedent and sister of [appellant,] filed
a Petition for Review Hearing alleging that
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[d]ecedent was not being cared for properly by
[appellant] nor was [appellant] accounting for her
expenses. An Amended Petition was filed by
Margaret on February 16, 2015 alleging additional
deficiencies in [appellant’s] care of [d]ecedent. On
February 20, 2015 this Court ordered Cambria
County Area Agency on Aging (“Agency”) to make
frequent, random and unannounced visits to the
residence of [d]ecedent and to report to the Court.
Throughout 2015, the Court received reports from
the Agency indicating that [d]ecedent was being
properly cared for, however, in at least one of these
reports [appellant] would refuse to identify the full
names of the caretakers of [d]ecedent to the Agency
investigator.
On June 18, 2016, [d]ecedent passed away. On
September 22, 2016, as noted above, the instant
Petition [“Objections to Final Report of Guardian of
Estate”] was filed. On October 20, 2017, [appellant]
submitted to the Court an unfiled Accounting of the
Guardianship Estate. After several continuances, a
hearing was held by the Court on January 30, 2018.
As a result of the hearing, the Court makes the
following:
FINDINGS OF FACT
1. At the hearing on January 30, 2018,
[appellant’s] answers to questions regarding
the compensation for [d]ecedent’s caretakers
were evasive and inconsistent.
2. When questioned by the Court, [appellant]
continued to provide little to no explanation
regarding who the caretakers were, how often
they were paid and by what measure they
were paid.
3. He indicated he had comingled his funds with
those of [d]ecedent and that he had
contributed sums of money to her account and
reimbursed himself therefrom.
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4. [Appellant’s] testimony was not credible.
5. [Appellant] expended $28,715.63 of
[d]ecedent’s principal assets without Court
approval and has not satisfactorily nor credibly
established where those sums went.
Trial court opinion, 3/28/18 at 1-2, ¶¶ 1-5.
The trial court concluded:
Based on the testimony of [appellant] under cross
examination and in response to the Court’s inquiries,
it is clear that he has not exercised the type of skill,
prudence and/or caution that the law mandates he
must in his former capacity as guardian for
[d]ecedent. The argument made that the cost of
[d]ecedent’s care would have been much more had
she been in an assisted-living facility does not relieve
[appellant] of his fiduciary duties. Having found his
testimony to be not credible and having given
[appellant] every opportunity to account for amounts
that were purportedly spent for the care of
[d]ecedent, the Court determines that he has not
done so in a way that the Court can countenance.
Id. at 3.
Appellant filed a notice of appeal on April 12, 2018. On April 12, 2018,
the trial court ordered appellant to file a concise statement of errors
complained of on appeal, pursuant to Pa.R.A.P. 1925(b). Appellant complied
with the order on April 30, 2018. On May 17, 2018, the trial court issued an
opinion pursuant to Pa.R.A.P. 1925(a).
On appeal, appellant raises the following issues for this court’s review:
I. Whether or not the Trial Court erred in failing
to adequately identify the basis and
methodology of arriving at or calculating the
surcharge imposed upon [a]ppellant[?]
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II. Whether or not the Trial Court erred in
surcharging [a]ppellant where no “loss” to the
Estate at issue has been clearly identified[?]
III. Whether or not the Trial Court erred in failing
to give consideration and/or weight to the
argument that any alleged “loss” would have
been greater had [a]ppellant enrolled his Ward
in a nursing home rather than care for her in
her home and the evidence that the Ward was
well taken care of at her residence[?]
IV. Whether or not the Trial Court erred in
surcharging [a]ppellant to compensate
Beneficiaries for a loss caused by a fiduciary’s
failure to meet his standard of care when no
consideration or allowance is made for the fact
that [a]ppellant is one (1) of four (4)
Beneficiaries which would necessitate a
decrease in the surcharge by twenty-five
(25%) percent[?]
V. Whether or not the Trial Court erred in failing
to acknowledge and recognize that the joint
account for which payment allegedly made for
the benefit of the Ward was established by the
incapacitated, evidencing her testamentary
intent to leave the same to [a]ppellant and any
“loss” associated with [a]ppellant’s decisions
were a “loss” to [a]ppellant only, not to his
Ward’s Estate[?]
Appellant’s brief at 4-5.
We begin our analysis with our standard of review:
When an appellant challenges a decree entered by
the Orphans’ Court, our standard of review “requires
that we be deferential to the findings of the Orphans’
Court.” In re Estate of Miller, 18 A.3d 1163, 1169
(Pa.Super.2011) (en banc).
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[We] must determine whether the record
is free from legal error and the court’s
factual findings are supported by the
evidence. Because the Orphans’ Court
sits as the fact-finder, it determines the
credibility of the witnesses and, on
review, we will not reverse its credibility
determinations absent an abuse of that
discretion. However, we are not
constrained to give the same deference
to any resulting legal conclusions.
Where the rules of law on which the
court relied are palpably wrong or clearly
inapplicable, we will reverse the court’s
decree.
Id. (alterations and citation omitted). Evaluating the
reasonableness of the amount of a surcharge is
within the province of a trial court. In re Wade’s
Estate, 343 Pa. 520, 23 A.2d 493, 495 (1942).
Absent an abuse of discretion, we will not disturb a
trial court’s finding. Id.
In re Estate of Brown, 30 A.3d 1200, 1206 (Pa.Super. 2011).
When a party seeks to recover assets misused by a fiduciary, it is
seeking to surcharge the fiduciary. “[I]t is well settled in this
Commonwealth that a fiduciary who had negligently caused a loss to an
estate may properly be surcharged for the amount of such loss.” Estate of
Lohm, 269 A.2d 451, 454 (Pa. 1970). A surcharge is the penalty imposed
for the failure to exercise common prudence, common skill, and common
caution in the performance of a fiduciary duty and is imposed in order to
compensate beneficiaries for a loss caused by a fiduciary’s lack of due care.
In re Estate of Schultheis, 747 A.2d 918, 927 (Pa.Super. 2000). The
objecting party bears the burden of proving wrongdoing on the part of the
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fiduciary. Once the objecting party establishes evidence of wrongful
conduct, the burden shifts to the fiduciary to prove due care. Id. “Where a
fiduciary claims credit for disbursements made by him, the burden rests
upon the fiduciary to justify them. Proper vouchers or equivalent proof must
be produced in support of such credits. Accountant’s unsupported testimony
is generally insufficient.” Strickler Estate, 47 A.2d 134, 135 (Pa. 1946).
Appellant addresses his argument to the first three issues
simultaneously because he believes that all three issues are interrelated and
that separate arguments for all three would be duplicative. In these first
three issues, appellant essentially argues that the trial court failed to identify
how it calculated the surcharge and that even if there was a loss, the alleged
loss to the estate was much less than it would have been if decedent had
been placed in a nursing home.
This court does not agree with appellant’s reasoning concerning the
calculation of the amount of surcharge. In the “Final Report of the Guardian
of the Estate of Josephine Gallo, an Incapacitated Person,” which appellant
prepared, Paragraph III.A.2.b. lists expenditures for caregivers as
$57,670.79. Paragraph III.B.1. lists total income received during the report
period as $28,955.16. In the “Objections to Final Report of Guardian of
Estate, filed by Margaret Gallo,” these amounts are both listed, and the
objection stated that the accounting did not provide detail as to the dates,
amounts, and caregivers paid from income and principal of decedent and
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that appellant failed to obtain court approval for the expenditure of principal
for decedent’s care and maintenance. (“Objections to Final Report of
Guardian of Estate”, 9/21/16 at 2.) The amount of the surcharge is the
difference between the amount expended for caregivers, $57,670.79, and
the income the estate received, $28,955.16 or $28,715.63. At the
commencement of the hearing on January 30, 2018, Eric Hochfeld, Esq.,
attorney for Margaret Gallo, stated that there was an expenditure of
principal assets of $28,715.63 for paid caregivers and explained the
calculation of total expenses for caregivers minus estate income described
above. (See notes of testimony, 1/30/18 at 3-5.)
In its opinion pursuant to Pa.R.A.P. 1925(a), the trial court explained
that there was not an adequate accounting provided to it to explain this
expenditure when the trial court specifically found appellant not credible.
The trial court further explained that there was no credible explanation for
the expenditure and no supporting documentation. (Trial court opinion,
5/17/18 at 2.) Section 5536(a) of the Probate, Estates, and Fiduciaries
Code, 20 Pa.C.S.A. § 5536(a), provides that a court may ratify payments
made from principal after the payments are made but is not required to do
so. The trial court determined that Margaret Gallo established that there
was a lack of care on the part of the fiduciary and that appellant failed to
establish due care. This court finds that the trial court did not abuse its
discretion when it imposed the surcharge.
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Appellant also argues that the loss would have been much greater had
he placed decedent in an assisted-living or other nursing facility. However,
appellant fails to cite to any authority for the relevance of that statement.
The test of whether a fiduciary fulfills his or her requisite duties is not
whether the fiduciary’s lack of due care resulted in less of a loss than some
alternate arrangement. Further, there was no testimony as to what type of
care decedent needed and what would have been the cost to the estate if
that care had been provided.
Appellant next contends that the trial court erred as a matter of law
and abused its discretion in surcharging appellant to compensate the
beneficiaries of decedent’s estate for an alleged loss where appellant was
one of the four beneficiaries of decedent’s estate so the amount of the
surcharge should be reduced by 25%.
Appellant fails to support this argument with any relevant case law or
statute. The trial court surcharged him for his actions as the guardian of the
estate of an incapacitated person. The trial court did not surcharge him for
his actions as the executor of the estate of decedent. At issue before the
trial court was whether appellant discharged his duties as guardian of the
estate of a living incapacitated person. While he may receive some of this
money back as a beneficiary of the estate of his deceased mother, that issue
was not before the trial court.
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Finally, appellant argues that the trial court erred when it surcharged
him because the joint account from which most of the payments were made
in relation to the payment to caregivers was established by decedent with
appellant as co-owner on November 1, 2007, and evidenced her intent to
leave the same to appellant at her death and/or make a lifetime gift to him
so that the only loss was to appellant and not to the estate.
At the hearing, appellant attempted to advance the argument that he
and his mother had a joint checking account but that his money went into
the account. (Notes of testimony, 1/30/18 at 11-12.) However, he did not
mention that the account was intended to be his upon her death and did not
provide any evidence of the funds he allegedly contributed to this account.
Once again, the trial court did not find appellant credible. There is no
evidence in the record to support his argument. The surcharge was applied
for actions appellant took as a fiduciary while his mother was alive.
Appellant has not established that the trial court abused its discretion.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/4/2019
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