In re McClatchy's Estate

• Decision Date: 15 January 1969
• Citation: 433 Pa. 232,249 A.2d 320
• Parties: In re ESTATE of John H. McCLATCHY, Deceased. Appeal of Jean M. FARRELL; Marguerite M. Ambrogi; John H. McClatchy, II; Elizabeth M. Dougherty; Dennis McClatchy; Patricia Y. Bock; and Deborah Y.Tinney.
• Court: Pennsylvania Supreme Court

249 A.2d 320

433 Pa. 232

In re ESTATE of John H. McCLATCHY, Deceased. Appeal of Jean M. FARRELL; Marguerite M. Ambrogi; John H. McClatchy, II; Elizabeth M. Dougherty; Dennis McClatchy; Patricia Y. Bock; and Deborah Y.Tinney.

Supreme Court of Pennsylvania.

January 15, 1969.

Philip D. Weiss, Desmond J. McTighe, McTighe, Koch Brown & Weiss, Norristown, for appellants.

Frank I. Ginsburg, F. Martin Duus, Chadwick, Petrikin, Ginsburg &amp Wellman, Chester, J. Brooke Aker, Smith, Aker, Grossman &amp Hollinger, Norristown, for appellees, John B. McClatchy and Richard A. McClatchy, executors.

Before BELL, C.J., and MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.

OPINION OF THE COURT

COHEN Justice.

This is an appeal from a decree of the Orphans' Court of Montgomery County dismissing objections to the account of John B. McClatchy and Richard A. McClatchy, executors of the estate of John H. McClatchy, deceased.

John H. McClatchy died testate on March 12, 1960. Two of his sons, John B. and Richard A. McClarchy qualified as executors under the will. The first and final account of the executors was filed on April 2, 1962. Objections were filed to that account by appellants, heirs under the will of decedent. The objections which appellants pursue on appeal are as follows:

1. The executors should be surcharged for failing to include in the estate stock of the 69th Street Community House Corporation, the 69th and Ludlow Streets Building Corporation and the 69th and Sansom Streets Building Corporation.

2. The executors should be surcharged for the repayment, from the probate estate of life insurance premiums paid on the life of decedent by the 69th Street Community House Corporation.

3. Certain counsel fees and executors commissions claimed or paid in the account should be denied.

4. Certain conveyances of real estate by decedent to executor John B. McClatchy during his life were invalid, and consequently such real estate should be included in the estate.

5. The executors should be surcharged for refunding from the estate to the 69th Street Community House Corporation and the 69th and Ludlow Streets Building Corporation certain monies allegedly drawn in advance by decedent as salary for services to be rendered after the date of his death.

We will dispose of these objections in the above order.

I. STOCK OF THE 69TH STREET COMMUNITY HOUSE CORPORATION 69TH AND LUDLOW STREETS BUILDING CORPORATION, AND 69TH AND SANSOM STREET BUILDING CORPORATION.

Appellants contend that shares in the aforementioned corporations were owned by decedent at the time of his death and hence should have been included in decedent's estate.

The facts pertinent to this issue are as follows: Decedent and one Samuel Clevenger were business associates in the 1920's. Decedent gave Clevenger and his wife ground rents on properties owned by decedent. In 1939 two notes payable to the Clevengers were given in lieu of the payment of the ground rent liability. When the two notes were signed, decedent pledged all of his stock in the said corporations as collateral for their payment. On December 1, 1939, Rosemary D. McClatchy, wife of executor John B. McClatchy, purchased the notes from the Clevengers and acquired decedent's stock as collateral. On May 1, 1940, the parties who are now executors wrote letters to the corporations calling attention to the fact that the notes were in default because of nonpayment of interest and because the corporations were insolvent. The letters contained a demand for immediate payment. On May 13, 1940, the corporations, acting through decedent, replied to those letters stating that the companies were unable to pay the notes, that they were insolvent, and that owing to their precarious financial position, it was hoped that no action would be taken which would result in bankruptcy. However, on June 1, 1940, the notes were foreclosed upon and the collateral (the stock) was sold to the parties who are now executors for $1.00, there being no competitive bidding by any other party. No notice of the sale was given to decedent.

Appellants contend that this sale did not constitute a valid foreclosure because (1) the notes on which the sale was based were not in default since no interest or principal payments were due at the time of the foreclosure sale; (2) there was no default resulting from insolvency and (3) no notice of the sale was given to decedent.

It is a well accepted principle that heirs cannot have interests in decedent's property higher than those which decedent had himself. Grossman v. Hill, 384 Pa. 590, 122 A.2d 69 (1956), Page, Wills § 59.2 (3d ed. 1962). Thus, if decedent could not have brought an action for the recovery of the stock, then neither could appellants. Appellants' objection is based upon events which occurred between decedent and appellees during a period of time so far in advance of decedent's death (20 years) that had decedent himself at the time of his death attempted to bring any such action based upon the event in question, his action would have been barred by the Statute of Limitations set forth in the Act of March 27, 1713, 1 Sm.L. 76, 12 P.S. § 31, and the Act of March 28, 1867, P.L. 48, 12 P.s. § 41, which limit the bringing of an action to a period no later than six years after the cause of action has accrued. Appellants contend, however, that the Statute of Limitations was tolled becaused of the concealment of the true situation from decedent with respect to the acquisition of the stock via the foreclosure proceedings. We must reject this contention in light of the amount of time which passed between the foreclosure sale and decedent's death, the benefits which decedent received from the corporations, and the fact that he personally had a part in reissuing the certificates of stock after the sale was made. Furthermore, certain memoranda written by decedent indicate that he was satisfied with the overall state of his business affairs and had no intention to change that state of affairs even if he had been able to do so.

Appellants further contend that the stock should be held in trust for decedent because the purchase of decedent's stock by the parties who are now executors violated a confidential relationship which existed beween them. The cases are clear that a parent-child relationship does not per se constitute a confidential relationship. Null's Estate, 302 Pa. 64, 153 A. 137 (1930); Leedom v. Palmer, 274 Pa. 22, 117 A. 410 (1922). In order to establish the existence of a confidential relationship it must be shown that there was an overmastering influence on the one side and weakness, dependence or trust on the other. Estate of Hazel E. Carson, 431 Pa. 311, 651, 245 A.2d 859 (1968); Brooks v. Conston, 356 Pa. 69, 51 A.2d 684 (1947); Null's Estate, supra; Leedom v. Palmer, supra.

Appellants attempt to show the existence of a confidential relationship between decedent and the executors on the basis of the memoranda written by decedent praising executor John B. McClatchy for his efforts to preserve the family business during difficult times. We believe that this evidence is insufficient to indicate that decedent was or could have been imposed upon in 1940. There is no evidence in the record to indicate that at that time decedent was unable to handle his financial and business affairs or was in any way so completely dependent upon the executors so as to create a confidential relationship which would then shift the burden onto the executors to prove the absence of fraud and that the transaction was fair and equitable, Estate of Hazel E. Carson, supra; Brooks v. Conston, supra.

Accordingly, we reject appellants' contention that the stock of the three corporations should have been included in decedent's estate.

II. LIFE INSURANCE PREMIUMS

Between 1946 and 1957, the 69th Street Community House Corporation paid life insurance premiums on insurance policies owned by decedent on his own life in the amount of $63,322.74. The executors' account discloses that Community was reimbursed by the estate for the premiums paid.

Appellants assert that the executors should be surcharged for these payments on the basis that Community's claim was invalid because (1) the executors were guilty of self-dealing in recognizing and paying the claim and (2) there was no legal obligation on the estate to reimburse Community because any amount due was barred by the Statute of Limitations.

In order to justify this payment, the executors rely exclusively upon the testimony of a non-stock holder and salaried employee of...