Sternlicht v. Sternlicht

• Decision Date: 20 June 2005
• Citation: 583 Pa. 149,876 A.2d 904
• Parties: Harold C. STERNLICHT, Appellant, v. Lauri Davidson STERNLICHT, Appellee.
• Court: Pennsylvania Supreme Court

876 A.2d 904

583 Pa. 149

Harold C. STERNLICHT, Appellant, v. Lauri Davidson STERNLICHT, Appellee.

Supreme Court of Pennsylvania.

Argued September 20, 2004.

Decided June 20, 2005.

Kerri Lee Cappella, Esq., Pittsburgh, for Harold C. Sternlicht.

Joanne Ross Wilder, Esq., Pittsburgh, for Lauri Davidson Sternlicht.

BEFORE: CAPPY, C.J., and CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and BAER, JJ.

OPINION

Justice BAER.

The sole issue before this Court is whether the Pennsylvania Uniform Transfers to Minors Act (PUTMA), 20 Pa.C.S. § 5301-5321, superseded the common law requirement that donative intent must exist in order to have a valid, completed inter vivos gift pursuant to PUTMA. For the reasons that follow, we hold that PUTMA superseded the common law requirement that donative intent must exist in order to have a valid inter vivos gift under PUTMA, therefore rendering the intent of the donor irrelevant to the validity of a gift made pursuant thereto. We, therefore, affirm the order of the Superior Court.

Laurie Davidson Sternlicht, Appellee (Mother), and Harold C. Sternlicht, Appellant (Father), are the parents of J.K. Sternlicht (Daughter), who was born on September 12, 1993. Mother and Father separated on March 27, 1997 and divorced on May 4, 1999. A decree of equitable distribution was entered on March 16, 1999.

During their marriage, Mother and Father established an Ameritrade account for Daughter pursuant to PUTMA, with Father as sole custodian (the custodian account).¹ This account consisted of a monetary deposit that was used to purchase a portfolio of stock from several corporations. In March, 1997, when the parties separated, the custodian account portfolio value was $5,600. Between October, 1997, and December, 1998, Father, as the account custodian, deposited $46,500 into the custodian account which Ameritrade, as broker, used to purchase stock.² These deposits, along with the appreciation of the stock and accumulated income, increased the value of the custodian account portfolio to $53,700 as of December 31, 1998. In 1999, the value of the stock in the custodian account continued to appreciate substantially.

During various times in 1999, Father sold a total of $59,759 worth of stock from the custodian account and withdrew this amount, leaving a custodial portfolio value of less than $9000 as of the end of December, 2000. Father used the proceeds of the stock liquidation from the custodian account to pay Daughter's private school tuition and put a down payment on a new home.

Concerned that Father had improperly liquidated stock from the custodian account, on January 22, 2001, Mother filed with the trial court a Petition for Accounting requesting that Father produce all records of the transactions relating to the custodian account.³ Although the trial court entered an order directing Father to produce all such records, Father did not produce any records demonstrating his management of the custodian account. Mother presented a Petition for Removal of Custodian and Other Relief on April 10, 2001, and a Petition for Enforcement on July 23, 2001, seeking to have Father restore the $59,759 he removed from the custodian account in 1999.⁴ Mother argued that the money Father had deposited into the custodian account, which was used to purchase stock, constituted an irrevocable gift to Daughter pursuant to PUTMA. Specifically, Mother averred that pursuant to Sections 5309 (specifying the manner of creating custodial property) and 5311(b) (stating that "[a] transfer made pursuant to section 5309 is irrevocable, and the custodial property is indefeasibly vested in the minor . . ."), irrevocable custodial property was created when Father deposited the money into the custodian account. 20 Pa.C.S. §§ 5309, 5311(b).

Father opposed the petitions, arguing that, consistent with the common law, an inter vivos gift made pursuant to PUTMA requires delivery and donative intent, and that Father lacked donative intent. See Wagner v. Wagner, 466 Pa. 532, 353 A.2d 819, 821-22 (1976) ("Essential to the making of a valid gift are donative intent on the part of the donor and delivery of the subject matter to the donee"). Conceding that depositing the money into the custodian account constituted delivery, Father argued that without donative intent, the gift fails, and the money never became the property of Daughter.

The trial court held a hearing on Mother's petitions on August 20, 2001. At the hearing, Father testified that he had established the custodian account for Daughter, and his desire when the account was opened was to put money into the account for her.⁵ Despite opening the account for the benefit of Daughter, Father also testified that his sole purpose in depositing money into the custodian account for the purchase of stock between October, 1997 and December, 1998, was to lessen his personal tax burden for capital gains.⁶ He stated with regard to the custodian account transactions subsequent to March, 1997, that he did not intend to gift the money placed in the custodian account to Daughter. Finally, Father testified that the value of the stock that existed in the custodian account as of March, 1997 ($5,600) remained in the custodian account after the 1999 sale of stock.

On August 24, 2001, the trial court denied Mother's Petition for Removal of Custodian, finding that Father was not required to return any monies he had withdrawn from the custodian account. Following the common law requirements for an inter vivos gift, i.e., delivery and donative intent, the trial court first noted the irrevocability of gifts made to minors under Section 5311(b) of PUTMA. However, because it believed that Father lacked donative intent to gift the subject funds to Daughter, the trial court held that the lack of donative intent defeated the irrevocability of the gift.

Relying on the plain language of Sections 5309 and 5311 of PUTMA, Mother appealed to the Superior Court, arguing that the trial court erred in failing to require Father to repay funds he had removed from the custodian account because this money constituted an irrevocable gift to Daughter and consequently should be repaid to her with interest.⁷ See 20 Pa. C.S. §§ 5309, 5311. After analyzing the purpose of PUTMA, the Superior Court agreed with Mother and found that the money Father transferred into the custodian account irrevocably became the property of Daughter, despite Father's testimony that he did not intend to gift this money to Daughter. Specifically, the court found that, contrary to the common law, PUTMA does not contain a requirement of donative intent before a gift made pursuant to PUTMA becomes the irrevocable property of the donee-minor, in accordance with the specific language of the statute.

Father filed a petition for allowance of appeal with this Court, arguing that the Superior Court erred and abused its discretion in concluding that donative intent is not required in order to have a valid, completed inter vivos gift under PUTMA. We granted allocatur to determine whether PUTMA supersedes the common law requirement that donative intent must exist in order to have a valid, completed inter vivos transfer pursuant to that statute. This is an issue of first impression in the Commonwealth. As this is a question of law, our standard of review is de novo and our scope of review is plenary. See In re Hickson, 573 Pa. 127, 821 A.2d 1238, 1242 (2003).

As he argued in his petition for allowance of appeal to this Court, Father presently avers that while Section 5311(b) of PUTMA provides that gifts made thereunder become irrevocable, PUTMA does not dispense with the common law requirement that there must be donative intent in order to have a valid, completed inter vivos gift. According to Father's argument, the common law requirements of a gift survive the enactment of PUTMA, and a transfer of ownership by gift requires that there be a present donative intent. See Wagner, 353 A.2d at 821. Father asserts that because he merely intended to gain favorable tax consequences by depositing funds into the custodian account to purchase stock, rather than to gift the funds to Daughter, he lacked the common law requirement of donative intent and, therefore, the gift ultimately fails.

Father also relies on the decisions of several sister states that have found that transfers made to PUTMA custodian accounts are only prima facie evidence of a gift, allowing parties to rebut this presumption. Gordon v. Gordon, 70 A.D.2d 86, 419 N.Y.S.2d 684 (N.Y.App.Div.1979); In re Marriage of Jacobs, 128 Cal.App.3d 273, 180 Cal.Rptr. 234 (1982); Golden v. Golden, 434 So.2d 978 (Fla.Dist.Ct.App. 1983); State v. Keith, 81 Ohio App.3d 192, 610 N.E.2d 1017 (Ohio Ct.App.1991); Gulmen v. Gulmen, 913 S.W.2d 852 (Mo.Ct. App.1995); Heath v. Heath, 143 Ill.App.3d 390, 97 Ill.Dec. 615, 493 N.E.2d 97 (1986); In re Marriage of Hendricks, 681 N.E.2d 777 (Ind.Ct.App.1997). Father argues that the case for uniform interpretation of the applicable statute is compelling because PUTMA is a uniform law. See supra, note 1.⁸ Thus, according to Father, this Court should align the law of this Commonwealth with the decisions of our sister states that have codified their own versions of UTMA and considered the issue in this matter.

On the other hand, Mother argues that the legislature superseded the common law requirement of donative intent by enacting PUTMA and specifically excluding a requirement of such intent. Mother argues that there is no need to look to our sister states for guidance on this issue. In this regard, Mother argues that the rules of statutory construction prevent us from looking to the decisions of our sister states as the wording of PUTMA is clear and unambiguous. See 1 Pa.C.S. § 1921(b) ("[w]hen the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit"). Thus, pursuant to a statutory construction...