Hera v. McCormick

• Decision Date: 21 May 1993
• Citation: 625 A.2d 682,425 Pa.Super. 432
• Court: Pennsylvania Superior Court
• Parties: Regina HERA and Judith Rosenthall, Executors of the Estate of Evelyn Hill, Appellants, v. Albert R. McCORMICK, Sr., Appellee.

Page 682

625 A.2d 682

425 Pa.Super. 432

Regina HERA and Judith Rosenthall, Executors of the Estate

of Evelyn Hill, Appellants, v. Albert R. McCORMICK, Sr., Appellee.

Superior Court of Pennsylvania.

Argued Feb. 9, 1993.

Filed May 21, 1993.

John B. Dunn, Stroudsburg, for appellants.

Robert M. Rosenblum, Stroudsburg, for appellee.

Before OLSZEWSKI, TAMILIA and FORD ELLIOTT, JJ.

OLSZEWSKI, Judge:

This is an appeal from the order entered against Regina Hera and Judith Rosenthall, executors of the Estate of Evelyn P. Hill ["appellants"], with regard to approximately $102,038.41 in assets allegedly belonging to the estate. Appellants argue that there was insufficient evidence to support the trial court's finding that appellee Albert McCormick, Sr. ["McCormick"] had received the funds from decedent as a valid inter vivos gift. After a lengthy and careful review of the record, we agree with appellants and remand for a new trial.

McCormick was a friend of Evelyn Hill's late husband who was permitted to live in one of Hill's tenant homes. Eventually McCormick moved in with Hill and another individual, Harry Rhodes, and began helping Hill with her business and personal affairs. It is not clear from the record, however, when McCormick first took up residence with Hill and Rhodes. In the final months before her death, Hill suffered from various illnesses including stage 4 breast carcinoma for which she was receiving radiation therapy. Hill required the assistance of Home Health Services of Monroe County to maintain a functioning colostomy and meet her hygiene needs. At times she would pull off her colostomy bag, refuse to eat, and become totally uncooperative. (R.R. 363a.) She also suffered from hallucinations. McCormick assisted Hill in bathing and eating. He also took her shopping and made arrangements to obtain home health aides to assist with her care. Rhodes helped with various household chores.

Early in April of 1991, McCormick and appellant Hera took a power of attorney executed by Hill, to United Penn Bank and redeemed $30,000.00 worth of Hill's certificates of deposit ["certificates"]. The power-of-attorney was executed on March 21, 1991, and issued jointly between Hera and McCormick. McCormick used $10,000.00 of the proceeds of this transaction to purchase a car for himself, and gave $20,000.00 to Hera. (R.R. 298a-299a.) All of the subsequent transactions were performed by McCormick alone, acting as attorney-in-fact, allegedly under the authority of a power of attorney executed in his name alone. These transactions included, inter alia, the following.

Between May 7 and May 9, of 1991, shortly before Hill's death, McCormick redeemed four certificates from United Penn Bank: No. 2401355 in the amount of $2,173.06; No. 2401324 in the amount of $14,208.81; No. 2419302 in the amount of $10,279.62; and No. 2442293 in the amount of $16,194.08. He also withdrew $2,572.56 from one of Hill's savings accounts at the same bank. (R.R. 141a.) From Third National Bank, McCormick cashed two certificates: No. A049697 in the amount of $25,800.00 and No. A049807 in the amount of $6,500.00. (R.R. 146a-156a.) McCormick testified that the certificates were given to him some time in early February, at which time Hill stated, "I gave enough people money. You cash them." (R.R. 76a.) He later testified that Hill signed the certificates and gave them to him in the later part of April, 1991. Additionally, McCormick closed several of Hill's bank accounts and wrote checks to pay off debts for Rhodes and himself.

One of the certificates, worth $10,279.62, was signed over to a man named Mr. Davenport to pay off a $5,000.00 debt which McCormick allegedly owed. Davenport returned the balance of the proceeds from the certificate to McCormick. At the initial hearing on November 14, 1991, McCormick testified that he invested approximately $25,000.00 to $27,000.00 in proceeds from Hill's certificates with a man named Ron Soja to start a mortgage company. McCormick gave his son, Albert McCormick, Jr., a $1,000.00 draft from Hill's checking account at First National Bank of Palmerton as a belated Christmas gift. McCormick also wrote checks against Hill's accounts to pay off additional debts and to make personal loans to his friends. ¹ McCormick used another certificate to pay off Rhodes' bills since Hill allegedly did not want Rhodes to have to work anymore. (R.R. 258a.) Two certificates from Third National Bank of Stroudsburg were rolled over and reissued in McCormick's name and his son's name, Albert McCormick, Jr. (R.R. 153a.)

Hill died on May 18, 1991, at the age of 83 leaving a will dated February 27, 1991, which named appellants, Regina Hera, Hill's long-time personal friend, and Judith Rosenthall, her niece, as co-executors of her estate. ² Appellants initiated this action against McCormick on October 29, 1991, alleging that he improperly transferred the $102,038.41 in estate assets to himself by asserting undue influence over Hill. They sought to have the assets returned to the estate. The trial court entered an order granting preliminary relief and ordering McCormick to file an accounting. (R.R. 57a-58a.) Following preliminary hearings, the court granted further relief enjoining McCormick from utilizing funds, proceeds or property, allegedly the property of Hill's estate. After a full and final hearing on May 11, 1992, however, the court determined that McCormick had received the certificates from Hill as a valid inter vivos gift and the temporary injunction was dissolved. No specific findings were made with regard to the proceeds received from Hill's checking and savings accounts. Post-trial motions were filed and denied. This timely appeal followed.

At the outset, we note that in reviewing a decree in equity, we are bound to accept the chancellor's findings of fact. Volunteer Fire Company v. Hilltop Oil Company, 412 Pa.Super. 140, 602 A.2d 1348 (1992). "The chancellor's findings are entitled to particular weight in a case in which the credibility of the witnesses must be carefully evaluated, because he has the opportunity to hear them and observe their demeanor on the stand." Id. at 145, 602 A.2d at 1351. Thus, our review is limited to a determination of whether there was an error of law and whether the chancellor's factual findings are supported by sufficient evidence. Id.

Appellants present eight challenges to the lower court's findings, five of which are corollaries to one central issue. We have thus divided appellants' argument into three basic issues: (I) did McCormick receive a valid inter vivos gift of certain certificates of deposit, saving accounts and checking accounts from Hill; (II) did a confidential relationship exist between Hill and McCormick, shifting the burden to McCormick to prove the validity of the gifts; and, (III) should the record have been opened to admit newly discovered evidence of fraud allegedly committed by McCormick on Hill's estate. We address each issue in turn.

I.

Appellants argue that the evidence did not support the lower court's finding that Hill made inter vivos gifts of her certificates and the proceeds of her checking and savings accounts to McCormick. The prerequisite elements necessary to prove a valid inter vivos gift are donative intent and delivery. Estate of Korn, 332 Pa.Super. 154, 480 A.2d 1233 (1984). Initially, the burden is on the alleged donee to prove a gift inter vivos by clear, precise and convincing evidence. In re Pappas Estate, 428 Pa. 540, 239 A.2d 298 (1968). Once prima facie evidence of a gift is established, a presumption of validity arises and the burden shifts to the contestant to rebut this presumption by clear, precise and convincing evidence. Id. As discussed below, a presumptively valid gift may be rebutted by establishing that donor and donee had a confidential relationship at the time the alleged gift was made. Banko v. Malanecki, 499 Pa. 92, 451 A.2d 1008 (1982); In re Estate of Clark, 467 Pa. 628, 359 A.2d 777 (1976).

A. Delivery

Our resolution of this matter commences with the question of whether there was adequate delivery. An actual or constructive delivery must not only divest donor of all dominion and control over the property, but also must invest donee with complete control over the subject matter of the gift. In re Estate of Evans, 467 Pa. 336, 356 A.2d 778 (1976). Appellants argue that Hill never divested herself of dominion and control of the certificates, despite her endorsement and transfer to McCormick, because they were non-negotiable and non-transferable. In its second opinion, the lower court conceded (contrary to its former findings) that "[a] power of attorney is necessary because the [certificates] are payable to Evelyn Hill and not to the order of Evelyn Hill. Therefore an endorsement alone is not sufficient to complete delivery." Trial court opinion at 10; see 13 Pa.C.S.A. § 3104. Nevertheless, the lower court sustained the validity of the gifts since it determined that Hill gave McCormick a power of attorney designating him to act alone as attorney-in-fact ["sole power"] and effect delivery of the gifts.

Appellants aver that the evidence was insufficient to prove that the sole power existed or that the terms permitted McCormick's transactions. We agree. The only evidence regarding powers of attorney introduced at trial were powers issued jointly to Rosenthall and Hera and to McCormick and Hera. Since there was no designation provided in the joint power indicating whether McCormick or Hera could act separately, both signatures were clearly required to act in accordance with § 5602 of the Pennsylvania Code. Section 5602 provides:

(b) Appointment of attorney in fact and successor attorney. A principal may provide for:

(1) The appointment of more than one attorney-in-fact, who shall act jointly, severally or in any other combination that the principal may designate, but if there is no such designation, such attorneys shall...