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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37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
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APPEAL OF: NANCY STAPLER-ELIAS :
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: 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).
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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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