In re Estate of Novosielski

• Decision Date: 25 September 2007
• Docket Number: No. 265 WDA 2007.,265 WDA 2007.
• Court: Pennsylvania Superior Court
• Parties: In re ESTATE OF Alice G. NOVOSIELSKI, Deceased. Appeal of Thomas V. Proch.

937 A.2d 449

In re ESTATE OF Alice G. NOVOSIELSKI, Deceased Appeal of Thomas V. Proch.

No. 265 WDA 2007.

Superior Court of Pennsylvania.

Argued August 21, 2007.

Filed September 25, 2007.

Reargument Denied December 4, 2007.

Theodore F. Huckestein, Jr., Pittsburgh, for appellant

John A. Modzelewski, Pennington, NJ, for appellee.

BEFORE: GANTMAN, TAMILIA and POPOVICH, JJ.

OPINION BY TAMILIA, J.:

¶ 1 Thomas V. Proch appeals from the January 8, 2007, Decree ordering him, inter alia, to inventory, within the Novosielski estate, the principal and proceeds of a treasury account titled in his and decedent Alice G. Novosielski's names.

¶ 2 On June 12, 1995, decedent duly executed a last will and testament bequeathing her substantial estate, in the event her husband predeceased her, per stirpes to two living siblings and the children of three other predeceased siblings. Record, No. 62, Objectors' Exhibits, Exb. H. At some point within the next few years, decedent began to experience health problems and required increased assistance in accomplishing every day tasks.

¶ 3 On August 25, 2000, decedent granted appellant a power-of-attorney. Immediately, appellant undertook a consolidation of decedent's assets. N.T., Master's Hearing Vol. 1, 11/14/05, at 70. This consolidation entailed transferring the assets held in a number of accounts to a single account with National City Bank of Pennsylvania. Id. at 70-71. Once the consolidation was complete, appellant began to explore various methods of investing the assets in the consolidated account. Id. at 72.

¶ 4 On September 15, 2000, decedent executed a codicil to her 1995 will. The codicil named appellant as the executor of her estate; provided for two $5,000 bequests—with appellant the named beneficiary of one of these bequests; and ratified and republished her 1995 will "in all other respects." Record, No. 63, Respondent's Exhibits, Exb. 5, First Codicil. Four days later, on September 19, 2000, the decedent executed a Treasury Bill, Note & Bond Tender (tender). Record, No. 62, Objectors' Exhibits, Exb. L. The tender was executed during a meeting between decedent and appellant with no other relatives or parties present and it was drafted by appellant. N.T., Master's Hearings, Vol. 2, 11/15/05, at 300. The tender was signed by the decedent and dated by appellant. N.T., Master's Hearing Vol. 1, at 77.

¶ 5 The tender authorized the issuance of a one-time $500,000 payment from the decedent's National City Bank account to be used for the purchase of a 13-week treasury bill that was to be held on account with a Federal Reserve Bank. Record, No. 62, Objectors' Exhibits, Exb. L. The tender further authorized three 13-week automatic subsequent and sequential reinvestments. Id. At the end of the investment period, or any extension thereof, the principal and interest from the treasury account were to be transferred back into decedent's National City Bank account. Id. More importantly, the tender provided that the treasury account be titled under the appellation "Alice G. Novosielski or Thomas V. Proch." Id. The tender did not specifically provide appellant with a right of survivorship in the event decedent predeceased him while the account was still open. Id.

¶ 6 At the expiration of the first four 13-week investment periods, appellant unilaterally decided to authorize a subsequent one-year reinvestment of the treasury account holdings without consulting decedent. N.T., Master's Hearing Vol. 2, at 302. On November 16, 2001, the decedent died at the age of 79, just weeks after appellant authorized the reinvestment.

¶ 7 On December 11, 2002, appellant, acting in his role as executor, filed a first and final account of the decedent's estate excluding the treasury account from the estate. Record, No. 10. Helen Modzelski, a/k/a Helen Modzelewski, decedent's sister, filed objections to the accounting arguing appellant did not own the treasury account simply by virtue of being listed as a co-owner on the tender at the time of decedent's death and, therefore, the treasury account should be inventoried with the estate. Record, No. 11.

¶ 8 On October 8, 2003, appellant filed an amended first and final account. In response, John Modzelewski—the son of Helen, who met an untimely demise shortly after issuing her initial objection—filed a second set of objections alleging appellant had abused his role as decedent's attorney-in-fact by misappropriating and/or misusing approximately $90,000 of the decedent's funds. Record, No. 30.

¶ 9 A special master was appointed and hearings were held from November 14, 2005, until November 16, 2005, with a later hearing being held on December 7, 2005. On July 7, 2006, the master issued his report wherein he concluded, in relevant part, appellant owned the treasury account. The master also concluded appellant had breached his fiduciary duty as decedent's attorney-in-fact and, as a consequence, recommended a surcharge of $96,059. On July 17, 2006, Mr. Modzelewski filed exceptions arguing the master had erred in awarding appellant ownership of the treasury account. Record, No. 41. The orphans' court agreed and issued the Order subject of this appeal.

¶ 10 Appellant raises a single issue for our consideration: "Did the lower court err in awarding the Treasury Direct Account in the amount of $500,000.00, titled in the names of Alice G. Novosielski or Thomas V. Proch to the estate of Alice G. Novosielski?" Appellant's brief at 3.

¶ 11 Our standard of review over a final Order from the orphans' court requires a determination as to whether an error of law, abuse of discretion, or a capricious disregard of competent evidence has occurred. In re Estate of Ciaffoni, 787 A.2d 971, 973 (Pa.Super.2001), citing In re Benson, 419 Pa.Super. 582, 615 A.2d 792, 793 (1992). In applying this standard, our scope of review is limited in that we must accord the factual findings of the orphans' court, sitting without a jury, the same weight and effect as we would a jury verdict. We will not disturb the court's findings absent manifest error. Id.

I. Characterizing the Treasury Account

¶ 12 As is often the case when the juxtaposition of family and money converge at the heart of a dispute, the parties in this case have little in the way of common ground. The parties' lengthy briefs both push for an intensive factual review of the case by this Court and there is significant disagreement on how the transactional structure of the treasury account initially should be characterized.

¶ 13 Appellant contends the treasury account is a "joint account" and, as such, distribution of the account is governed by the Multiple-Party Accounts Act (MPAA). See 20 Pa.C.S.A. §§ 6301-6306. According to appellant's characterization, the following provision of the MPAA controls:

(a) JOINT ACCOUNT.—Any sum remaining on deposit at the death of a party to a joint account belongs to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intent at the time the account is created.

20 Pa.C.S.A. § 6304, Right of survivorship, (a) Joint account.¹

¶ 14 The MPAA defines an "account" as "a contract of deposit of funds between a depositor and a financial institution, and includes a checking account, saving account, certificate of deposit, share account and other like arrangements." 20 Pa. C.S.A. § 6301, Definitions. The MPAA defines "joint account," in turn, as "an account payable on request to one or more of two or more parties whether or not mention is made of any right of survivorship." Id.

¶ 15 There is no dispute decedent was a "depositor" for purposes of the MPAA definition of "account." The parties also do not dispute that the Federal Reserve Bank responsible for administering decedent's treasury account is a "financial institution" for purposes of section 6301. See also Deutsch, Larrimore & Farnish, P.C., 577 Pa. 637, 848 A.2d 137, 146 (2004) (Cappy, C.J. dissenting) (noting that for purposes of the MPAA, the phrase "financial institution" unquestionably encompasses all banks and financial institutions). While it is apparent the treasury account subject to our review is not one of the enumerated transactional structures in section 6301, it is yet to be determined whether the treasury account is an "other like arrangement." There are very few reported cases wherein a court of this Commonwealth, or any other court for that matter, has considered whether a certain transactional structure is an "other like arrangement" for purposes of section 6301.

¶ 16 In Deutsch, Larrimore & Farnish, P.C., supra, a fractured Supreme Court analyzed the question of whether a Morgan Stanley/Dean Witter brokerage account was an "other like arrangement."² While the Justices disagreed on various aspects of the case, two approaches emerged for analyzing such questions.

¶ 17 The first, advanced by Madame Justice Newman in the plurality Opinion, focuses on the transactional structure at issue in order to determine whether the depositor deposited funds with a financial institution with the expectation that the funds would generate some future yield. Id. at 141. In advancing this approach, Madame Justice Newman delineated a distinction in the case law between the transfer of the ownership of an asset directly to the depositor and the receipt of an ownership interest in an account or other entity holding a specific asset on the depositor's behalf. Id., quoting Balazick v. Ireton, 518 Pa. 127 n. 1, 541 A.2d 1130 n. 1 (1988) ("Ownership of the securities is not transferred to the customer, and the bank does not create a deposit contract," but "issues a receipt indicating the ownership of the interest [that] has been created ..."). The second approach, set forth in Justice Saylor's concurring Opinion, focused on looking to whether the Morgan Stanley/Dean Witter brokerage account shared "characteristics generally associated" with some of the traditional...