NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P Appellant No WDA 2012

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1 NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P IN RE: ESTATE OF MARIA CICCHINO IN THE SUPERIOR COURT OF PENNSYLVANIA APPEAL OF: GEMMA L. ERK, ADMINISTRATRIX Appellant No WDA 2012 Appeal from the Order entered November 15, 2012, in the Court of Common Pleas of Allegheny County, Orphans Court, at No(s): BEFORE: FORD ELLIOTT, P.J.E, ALLEN, and COLVILLE*, JJ. MEMORANDUM BY ALLEN, J.: FILED NOVEMBER 20, 2013 Gemma L. Erk ( Appellant ) appeals from the trial court s order relative to her exceptions and in favor of the Estate of Maria Cicchino, deceased ( Estate or alternatively Decedent ). We affirm and deny Appellant s motion to strike the Estate s brief. We glean the following facts from our review of the record. Appellant and Decedent originally met [e]ighteen years ago when [Appellant] worked with [Decedent] as a hairdresser in a hair salon. N.T., 2/8/12, at 118. Appellant and Decedent entered into a partnership to open a hair salon. Id. at Both Appellant and Decedent contributed capital to the partnership, on an equal 50/50 basis. Id. at Via the partnership, Appellant and Decedent acquired real estate as tenants in *Retired Senior Judge assigned to Superior Court.

2 common and each owned [the real estate] 50 percent. Id. at The real estate was located at West Liberty Avenue in Dormont, Pennsylvania. See Estate s Pre-Trial Statement, 2/7/12, at 2. The real estate consist[ed] of a first floor retail space and two upstairs rental apartments. Id. The real estate was financed by a $140,000 mortgage with Allegheny Valley Bank, and a $50,001 mortgage with United American Savings Bank. Id. Appellant and Decedent formed a corporation named Bella Salon, Inc., which was owned 50/50 by Appellant and Decedent. N.T., 2/8/12, at While the partnership owned the real estate, the corporation owned fixed assets, goodwill and assets used for the business of the hair salon. N.T., 11/11/11, at The hair salon operate[d] out of [the] real estate[.] Estate s Pre-Trial Statement, 2/7/12, at 2. The partnership agreement between Appellant and Decedent provided in pertinent part as follows: 1. The Partners voluntarily associate themselves together as general partners for the purpose of conducting the general business of real estate ownership and management services, the ownership and operation of a beauty salon business and any other business that may from time to time be agreed upon. *** 3. The Partnership shall commence as of April 30, 2007 and shall continue until dissolved by mutual agreement of the parties, or terminated as provided in this Agreement. *** 15. On dissolution of the Partnership by the withdrawal or other act of a Partner, the remaining Partner, on written notice to the - 2 -

3 other Partner within thirty (30) days of the dissolution, may continue the Partnership business by purchasing the interest of the other Partner in the assets and goodwill of the Partnership. The remaining Partner shall have the option to purchase the interest of the withdrawing Partner by paying to this Partner or the Partner s Personal Representative the value of the interest determined as provided in Paragraph 16 of this Agreement. 16. On exercising of the option described in Paragraph 15 above, the remaining Partner shall pay to the person who is legally entitled to it, the net book value of the interest as shown on the last regular accounting of the Partnership preceding the dissolution together with the full unwithdrawn portion of the deceased, withdrawing, or terminated Partner s distributive share of any net profits earned by the Partnership between the date of the accounting and the date of dissolution of the Partnership. 17. If the Partnership is dissolved by death of a Partner, the remaining Partner shall have the obligation within one hundred eighty (180) days from the date of death of the deceased Partner to purchase the interest of the deceased Partner in the Partnership and to pay to the personal representative of the deceased Partner the value of that interest as provided in Paragraph 16 of this Agreement. During this one hundred eighty (180) day period following the death of a Partner, the remaining Partner may continue the business of the Partnership but the estate or personal representative of the deceased Partner shall not be liable for any obligations incurred in the Partnership business that are greater than any amount includable in the estate of the deceased Partner that was previously invested or involved in the Partnership and remained so on the date of death. The estate of the deceased Partner shall be obligated to sell her Partnership interest as provided entitled, at the election of the deceased Partner, either to one the Partnership business during in this Agreement and shall be personal representative of the half of the net profits earned by this one hundred eighty (180) day period or to interest for the use during this period of the deceased's interest in the partnership business at the rate of six (6%) percent a year on the value of the partnership interest determined as provided in Paragraph 16 of this Agreement. 18. On any purchase and sale pursuant to the provisions of Paragraphs 15, 16 and 17 of this Agreement, the remaining Partner shall assume all obligations of the Partnership and shall - 3 -

4 hold the withdrawing Partner, the personal representative and estate of a deceased Partner, and the property of any withdrawing or deceased Partner, free and harmless from all liability for these obligations. Furthermore, the remaining Partner, at her own expense, shall immediately cause to be prepared, filed, served and published all notices that may be required by law to protect the withdrawing Partner or the personal representative or estate of a deceased Partner from liability for the future obligations of the Partnership business. Partnership Agreement, 4/30/07, at 1, 4-7. Appellant and Decedent purchased life insurance for income replacement, mortgage payoff. N.T, 2/8/12, at 129. The original beneficiaries were the spouses of Appellant and Decedent. Id. at Appellant explained that in securing the life insurance: [Appellant and Decedent] were most concerned about paying off the debts. We had bills. Mostly, we [wanted] to make sure we could afford to stay there without each other. We each put a certain amount of money into the business to run it every week. We both wanted to be able to keep our business if something happened to the other person. Id. at Appellant further explained that Bella Salon paid the life insurance premiums. Id. at 131. Decedent died on July 10, 2009 from breast cancer following eight months of treatment. Id. at 20. Prior to her death, Decedent s life insurance beneficiary was changed to Appellant. Id. at 138. Charles Fedel, the attorney for Decedent and her spouse Palmo Cicchino, was present when Decedent s life insurance beneficiary was changed to Appellant as the hundred percent primary beneficiary of [Decedent s] policy [and] [Appellant was] listed as a partner. Id. at

5 The following exchange occurred when the trial court questioned Attorney Fedel regarding the purpose for the beneficiary change: [Trial] Court: Why was [Decedent s life insurance] changed to [Appellant]? Now, I understand that somewhere along the line, somebody s basically saying that it was sort of like to make sure that the insurance company, that the medical people weren t paid, but I won t go so far as to call that defrauding creditors, but basically what you wanted to do [was] to make sure the creditors didn t get any money, right? [Attorney Fedel]: Well, certainly didn t get it easily. [Trial] Court: Okay. So that was the reason? [Attorney Fedel]: Yes. Id. at 109. Attorney Fedel further explained to the trial court that the life insurance was key man insurance. Id. at 117. Appellant, as administratrix of the Estate, filed a First and Final Account ( Account ) on June 1, Id. at 142. In the Account, Appellant valued the Decedent s interest in the real estate at $75,000, the Decedent s stocks and closely-held bonds in Bella Salon, Inc. as $1,311, and Decedent s partnership interest at $1,581. Id. at Appellant paid [her] accountant to do [the foregoing] appraisal. Id. at 144. Appellant specified that she hired [the accountant] to value the partnership [and the corporation] based on the formula that was in my partnership agreement. Id. at 144. Appellant filed a $111, creditor clam against the Estate, which included a $6, claim for costs incurred in raising the estate. Id. at Of Appellant s $111, claim, the trial court only granted - 5 -

6 the claim amount of $6,095.74, which represents a class 1 administrative claim, and denied the remaining $105, See Order, 11/15/12, at 2 (unnumbered). Appellant filed a supplemental claim of $10, on June 2, 2011, which the trial court also denied. Id. at 155; see Order, 11/15/12, at 2 (unnumbered). The trial court made the following findings of fact: 1) In January of 2008, [Decedent] and [Appellant] purchased reciprocal key-man life insurance policies in the amount of $250,000 from Erie Life Insurance Company. 2) The purpose of the key-man insurance policies was to enable the surviving partner to purchase the interest of the deceased partner in the partnership and to provide funds for the continued operation of the business despite the lose [sic] of the deceased partner's revenue. 3) The surviving partner's claims against the partnership are limited by the partnership agreement. The buy-sell obligations of the partners are governed by the partnership agreement. 4) The corporation, Bella Salon, Inc., is not governed by the partnership agreement. Order, 11/15/12, at 1-2 (unnumbered). The trial court recited the procedural posture of this case as follows: [Decedent] died intestate on July 10, Letters of Administration were granted to [Appellant] on May 24, An account was filed by [Appellant] on June 2, On August 12, 2011, exceptions/objections were filed to the account on behalf of [Decedent s spouse]. Numerous other pleadings were filed and a trial occurred before this Court on February 8, This Court issued an Order resolving the issues on May 10, [Appellant] filed exceptions. On June 29, 2012, after considering the exceptions, this Court vacated its Order and issued a new Order resolving the issues before the Court

7 Exceptions were filed by both parties, and on November 1[5], 2012, upon consideration of oral argument, memorandum and responses, and the entire record, this Court issued an Order resolving the exceptions. On November 28, 2012, [Appellant] filed an appeal to the Pennsylvania Superior Court. This Court Ordered [Appellant] to file a 1925(b) Statement of errors complained of on appeal. [Appellant] filed her Statement on December 21,2012. Trial Court Opinion, 2/20/13, at 1-2 (unnumbered). Appellant presents the following issues for our review: I. Did the trial judge incorrectly deny Appellant s creditor claims for lack of evidence when the only evidence presented at trial by [Decedent s spouse] was in support of the creditor claims, and the trial judge ended the trial after [Decedent s spouse s] casein-chief citing the fact that [Decedent s spouse s] testimony proved the accuracy of the valuations and claims in the First and Final Account and Petition for Distribution? II. Did the trial judge incorrectly treat the estate as being solvent when he failed to recognize creditor claims, administrative claims, and two mortgage debts that were validated at trial, and granted title of Decedent s interests in the corporate stock, real estate, and rental income to the intestate heirs, granted title of the partnership interest to the estate without further adjudication, and used key man life insurance proceeds to offset the mortgage debts of the estate? III. Did the trial court improperly allow Exhibit B of [Decedent s spouse s] Responses to Appellant s Second Set of Exceptions to qualify as an accurate accounting of all assets collected on behalf of Decedent both prior to and after her death when Exhibit B merely provides invoices of expenses without any documentation of assets collected? IV. Has the trial court improperly denied Appellant s claim for counsel fees when the evidence obtained at trial, in conjunction with the entire record of this case, reflect that [Decedent s spouse] refused to raise an estate for his wife in order to avoid paying estate creditors, and [Decedent s spouse] filed objections to Appellant s account when [Decedent s spouse] had no evidence to contradict the numbers in the account, and - 7 -

8 [Decedent s spouse] continues to argue that the court deny payment to estate creditors despite the fact that the creditor claims were validated at trial? Appellant s Brief at 6. All of Appellant s issues require our review under an abuse of discretion standard. See In re Estate of Cherwinski, 856 A.2d 165, 167 (Pa. Super. 2004). An abuse of discretion exists where the trial court s determination overrides or misapplies the law, its judgment is manifestly unreasonable, or the result of partiality, prejudice, bias, or ill-will. See Majczyk v. Oesch, 789 A.2d 717, 720 (Pa. Super. 2001). Because Appellant s first and second issues are interrelated, we will address them together. Appellant summarizes her first issue and request for relief as follows: Because there is no basis on the record or the law for the decision of the trial court to deny the creditor claims listed in the First and Final Account and Petition for Distribution [because] [Decedent s spouse s] own witnesses proved the accuracy of the valuations and claims, and Appellant was precluded from presenting her case at trial, Appellant asks that paragraph 4 of the November 15, 2012 Order of Court be reversed and the creditor claims be granted in full. Appellant s Brief 21. Appellant s second issue claims that the trial court abused its discretion by granting estate assets to intestate heirs when the estate is insolvent based on Appellant s creditor claims. Id. at 17. Appellant is not entitled to relief. The record does not reflect that Appellant was precluded from presenting her case. Significantly, after Appellant was called by the Estate, - 8 -

9 the trial court indicated to Appellant s counsel you can cross-examine your client or directly examine your client or however you want to do it. Since [the Estate] didn t ask to declare [Appellant] a hostile witness, you can cross-examine her. N.T., 2/8/12, at When Appellant s counsel indicated I would also like to reserve to call [Appellant] back in our case, the trial court said All right. I got all day Friday and most of March [2012]. Id. at 160. Appellant testified only generally as to the claimed expenses, and reiterated that they were paid both personally and from the corporation[.] Id. at 161. Appellant s counsel declined to re-cross Appellant after the Estate conducted re-direct of Appellant. Id. at 168. Appellant emphasizes that the accuracy of her non-administration related creditor claims of $105, and $10, precludes their denial by the trial court. However, in denying the claims, the trial court determined that [t]here was insufficient evidence to establish the remaining claim amount of $105,300.09, and the claim for $10, Trial Court Opinion, 2/20/13, at 3 (unnumbered). Specifically, the trial court found that [Appellant] did not establish any specific paid expenses that these claims represented. She did not show how these claim amounts were calculated. [Appellant] testified generally to the amounts...there was no evidence to show the exact amounts paid, the date paid, to whom they were paid, or any other information that was necessary to prove the claimed amounts of $105, and $10, Id. at 3-4 (unnumbered) (citation to notes of testimony omitted)

10 Moreover, our review of the record further reveals that the purported accuracy of the specific amounts claimed by Appellant contrasts with the confusing nature of who the appropriate creditors are. Appellant conceded that her $111, claim was made on a personal basis. Id. at 145. Appellant testified that the costs associated with raising the estate were paid by Appellant and not paid by Bella Salon. Id. at 146. However, as to the remaining $105,300.09, only some of th[ose] expenses were paid by Appellant personally, while others were paid out of Bella Salon. Id. at 147. Bella Salon, Inc. did not file a claim against the Estate. Paul Amoroso, Appellant s accountant, testified, the partnership owning the building needs to make the mortgage payments. It s not able to do that without transferring money from Bella Salon[, Inc.] to the partnership, and then the partnership is making a payment right out of its account. Id. at 182. Mr. Amoroso further explained [t]he other expenses that were being paid, the utilities, just the maintenance on the building, those kinds of things, [Appellant] paid out those as much as she could out of the partnership, and when she ran out of the money, [Appellant] would try to take some money out of Bella Salon[,Inc.] if it had it. Id. at 183. Mr. Amoroso agreed with Appellant s counsel s argument that If I were to tell you, account for it, [Appellant] owns the business and it s [Appellant s] money being paid[.] Id. at 183. Appellant s argument discounts that while Appellant was the surviving owner of the real estate, the partnership, and of Bella Salon, Inc., Appellant

11 was not the sole owner of these entities by virtue of Decedent s death at the times the monies claimed were being transferred between the entities and expended. Stated another way, while the partnership dissolved at death, there was still a requirement for a buyout of the Decedent s partnership interest as set forth under Section 16 of the partnership agreement, in order for the Decedent s interest to be terminated. A buyout has not occurred. Further, the tenancy in common by which the real estate was owned would not devolve Decedent s share to Appellant at Decedent s death. See Estate of Bruce, 538 A.2d 923, 927 (Pa. Super. 1988) (reiterating well settled precept that where land is held by tenants in common, each tenant holds an undivided interest in the property and that interest does not terminate upon the death of one of the tenants ). By causing the partnership to borrow from the Bella Salon corporate entity, Appellant incurred debt which may be precluded by Section 17 of the partnership agreement. Section 17 of the agreement provides in pertinent part that if the partnership remains in operation during the 180 day period following the death of a Partner, the remaining Partner may continue the business of the Partnership but the estate or personal representative of the deceased Partner shall not be liable for any obligations incurred in the Partnership business that are greater than any amount includable in the estate of the deceased Partner that was previously invested or involved in the Partnership and remained so on the date of death. While we do not reach the issue of whether Appellant appropriately transferred monies

12 among the entities, nor whether incurring such debt violates Section 17 of the partnership agreement such that it may not be chargeable against the Estate, such factual quagmires support the trial court s determination that Appellant s creditor claims should be denied, particularly when Bella Salon, Inc., as a payee of some of those claimed expenses, never made a claim against Decedent s Estate. 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. In re Estate of Presutti, 783 A.2d 803, 805 (Pa. Super. 2001) (quoting In re Estate of Angle, 777 A.2d 114, (Pa. Super. 2001)). If the court's findings are properly supported, we may reverse its decision only if the rules of law on which it relied are palpably wrong or clearly inapplicable. Owens v. Mazzei, 847 A.2d 700, 706 (Pa. Super. 2004) (citing In re Estate of Harrison, 745 A.2d 676, (Pa. Super. 2000), appeal denied, 563 Pa. 646, 758 A.2d 1200 (2000)). In re Estate of Fritts, 906 A.2d 601, 606 (Pa. Super. 2006). Given the state of the record, the trial court was within its discretion to partially deny Appellant s creditor claims, allowing only the costs incurred for administrative expenses. We are not persuaded by Appellant s contention that the trial court erred or abused its discretion in failing to credit the testimony and arguments set forth by Appellant to support her creditor s claims. See Fritts, 906 A.2d at 606; see also Commonwealth v. Boczkowski, 846 A.2d 75, 82 (Pa. Super. 2004) citing Commonwealth v. Tharp, 830 A.2d 519, 527 (Pa. 2003) (a fact finder [is] not obligated to accept evidence submitted by a party). Based on our resolution of

13 Appellant s first issue, we likewise do not find that the trial court erred in treating the estate as solvent and distributing Decedent s interest in the corporation, the partnership, and the real estate to her intestate heirs pursuant to the intestate succession statutes at 20 Pa.C.S. section 2101 et seq. Order, 11/15/12, at 2 (unnumbered). We further note that ordinarily a trial court can only determine the beneficiary of life insurance, and is precluded from directing the allocation or use of the proceeds. In re Henderson s Estate, 149 A.2d 892, 895 (Pa. 1959) (proceeds of a life insurance policy are not subject to administration). This principle, however, does not bar the trial court under the circumstances of this case, from exercising its equitable powers to determine that Appellant cannot both receive the benefit of the life insurance policy and the windfall of having the estate pay for half of the business debts, which the insurance was intended to satisfy. As Appellant s counsel conceded, the trial court at all times sit[s] as a chancellor [and the trial court is] allowed to say, Well, this is the fair thing to do. N.T., 3/28/12, at 13; see Trial Court Opinion, 2/20/13, at 4-6 (unnumbered). In her third issue, Appellant asserts that the trial court improperly allow[ed] Exhibit B of [Decedent s spouse s] Responses to Appellant s Second Set of Exceptions to qualify as an accurate accounting of all assets collected on behalf of Decedent both prior to and after her death when Exhibit B merely provides invoices of expenses without any documentation of assets collected. Appellant s Brief at 7. The trial court rebutted this

14 contention by noting that the submission from Decedent s spouse sufficiently demonstrated that Decedent s spouse expended more in funeral bills and burial related expenses than he received from fundraising. See Trial Court Opinion, 2/20/13, at 6-7 (unnumbered). We will not disturb the trial court s determination. See In re Novosielski, 992 A.2d 89, 104 (Pa. 2010) ( Absent extraordinary circumstances, an appellate court will not substitute its judgment for that of the fact finder. ). With regard to Appellant s fourth issue, we additionally affirm the trial court s denial of an attorney fee award to Appellant in this case because, after our review of the record, we agree with the trial court that the objections raised by Decedent s spouse were not meritless, so as to warrant the award of attorney fees. See Trial Court Opinion, 2/20/13, at 7 (unnumbered). Significantly, Appellant s counsel conceded that attorney fees would only apply if the trial court s order reflected that not only was [the Estate s] objection not well-founded but as a matter of fact that it was malicious. N.T., 3/28/12, at 21. The trial court did not so conclude, and therefore, we affirm the denial of attorney fees. In sum, we have reviewed the record and conclude that there was no abuse of discretion by the trial court which would warrant our reversal of the trial court s order partially denying Appellant s creditor claims, distributing assets to intestate heirs, accepting the accounting from Decedent s spouse, and declining to award attorney fees. The trial court s exercise, or lack thereof, of its equitable powers will not be disturbed absent an abuse of

15 discretion. See Coldren v. Peterman, 763 A.2d 905, 907 (Pa. Super. 2000). Findings of fact made by the [trial court] will not be disturbed unless they are unsupported by competent evidence or are demonstrably capricious. The Morning Call vs. Bell Atlantic-Pennsylvania, Inc., 761 A.2d 139, 141 (Pa. Super. 2000). Accordingly, based on the foregoing precepts, in conjunction with our careful review of the record, we conclude that the trial court s findings are supported by competent evidence and are not determinably capricious, and therefore, we affirm. Order affirmed. Motion to Strike Estate s Brief denied. Judgment Entered. Joseph D. Seletyn, Esq. Prothonotary Date: 11/20/