In Re: Cowan, R., Appeal of: Cowan, N. ( 2019 )


Menu:
  • J-A23035-18
    NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
    IN RE: RICHARD D. COWAN, DECEASED                  IN THE SUPERIOR COURT
    OF PENNSYLVANIA
    v.
    APPEAL OF: NORMA D. COWAN
    No. 312 WDA 2018
    Appeal from the Order Entered February 13, 2018
    In the Court of Common Pleas of Allegheny County
    Orphans' Court at No: 245 of 2016
    BEFORE: BOWES, SHOGAN, and STABILE, JJ.
    MEMORANDUM BY STABILE, J.:                                  FILED MARCH 19, 2019
    Appellant, Norma D. Cowan, appeals from the February 13, 2018 order
    denying her claim against the estate of her son, Richard D. Cowan
    (“Decedent”). We reverse and remand.
    At the time of his death at age 57 on November 17, 2015, Decedent, an
    internationally    known     opera    singer,   and   his   estranged   wife,   Uliana
    Kozhevnikova, owned a home in Pittsburgh (the “Pittsburgh Home”) subject
    to a five-year $220,000.00 balloon mortgage. In 2014, while Decedent was
    working in France, Kozhevnikova began receiving letters threatening
    foreclosure on the Pittsburgh Home.              Appellant contacted his parents
    (Appellant and Paul Cowan1) for help. Decedent’s parents, with the help of
    ____________________________________________
    1 Appellant and Paul Cowan filed the claim jointly. Paul Cowan subsequently
    passed away. N.T. Hearing, 1/16/18, at 3.
    J-A23035-18
    their financial advisor, Matthew Olver, devised a plan to pay the $197,058.66
    outstanding on the mortgage of the Pittsburgh Home.           Decedent’s parents
    borrowed $30,000.00 and liquidated $26,858.66 in investment funds, and
    Decedent contributed $140,200.00 from an IRA.
    According to Appellant, Decedent intended to repay his parents and
    replenish his IRA with proceeds from the sale of property Decedent owned in
    France (the “French Property”). When it became evident that Decedent would
    not consummate the sale within the 60-day IRS grace period, Decedent’s
    parents took out a line of credit of $140,200.00 to replenish Decedent’s IRA,
    which they did by wire transfer on November 19, 2014. In August of 2015,
    Decedent’s parents asked his sister, Marcy Cowan, to arrange for a promissory
    note memorializing Decedent’s obligation to repay his parents. Decedent died
    suddenly in Pittsburgh in November of 2015, and there is no evidence that he
    ever received or signed a note.
    The record reveals that the French Property sold, with net proceeds to
    Decedent of $110,530.00, on October 14, 2015 shortly before Decedent’s
    passing. From the proceeds, he made a partial repayment to his parents of
    $59,464.08 toward the $197,058.66 they advanced to him. Unable to resolve
    the remaining outstanding balance with Kozhevnikova, the administratrix of
    Decedent’s estate, Appellant filed a claim for $151,106.10 on May 15, 2016,
    representing   the   outstanding   unpaid   principle   and    interest,   and   a
    supplemental claim of $24,350.12 on December 24, 2017 for additional
    -2-
    J-A23035-18
    accrued interest. The trial court conducted a hearing on January 16, 2018
    and, on February 13, 2018, issued the order denying Appellant’s claim. This
    timely appeal followed.
    Appellant presents two assertions of error:
    1. The trial court erred as a matter of law and abused its discretion
    by denying that part of the claim seeking repayment of the loan
    made by Paul and Norma Cowan to [Decedent], when the
    record established by clear and convincing evidence that a loan
    was made and not a gift.
    2. The trial court erred in not admitting the emails from Decedent
    to Cuyler Etheredge finding them to be hearsay and not
    authenticated.
    Appellant’s Brief at 5.
    Our standard of review is as follows:
    When reviewing a decree entered by the Orphans’ Court,
    this Court must determine whether the record is free from legal
    error and the court’s factual findings are supported by the
    evidence. 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 Fiedler, 
    132 A.3d 1010
    , 1018 (Pa. Super. 2016), appeal denied, 
    145 A.3d 166
    (Pa. 2016). “However, we are not constrained to give the same
    deference to any resulting legal conclusions.” 
    Id. Our review
    of questions of
    law is de novo, and our scope of review is plenary.        “[A] claim against a
    decedent’s estate can be established and proved only by evidence which is
    clear, direct, precise and convincing.” Estate of Allen, 
    412 A.2d 833
    , 836
    (Pa. 1980). “[T]he burden of proof lies upon the claimant.” 
    Id. -3- J-A23035-18
    The trial court found that the transfer of funds from Decedent’s parents
    to Decedent was presumed to be a gift, and that Appellant failed to adduce
    sufficient evidence to overcome that presumption. The trial court’s decision
    was legally erroneous and devoid of support in the record. The trial court
    relied on Hornyak v. Sell, 
    629 A.2d 138
    (Pa. Super. 1993), in which we cited
    the “settled proposition that ‘[i]f a parent furnishes the purchase money and
    title to property is taken in the name of a child, a presumption arises that the
    parent intended the funds to be a gift.’” 
    Id. at 140
    (quoting Kohr v. Kohr,
    
    413 A.2d 687
    , 689 (Pa. Super. 1979)).           Hornyak explained that this
    presumption arose from § 443 of the Restatement (Second) of Trusts:
    Where a transfer of property is made to one person and the
    purchase price is paid by another, and the transferee is a wife,
    child, or other natural object of bounty of the person by whom the
    purchase price is paid, and the latter manifests an intent that the
    transferee should not have the beneficial interest in the property,
    a resulting trust arises.
    
    Id. at 140
    (quoting Restatement (Second) of Trusts § 443).
    In Hornyak, the defendant’s father-in-law lent him $5,000.00 toward
    closing costs for the purchase of a home. This Court declined to consider
    whether the presumption applied, noting sufficient evidence—including oral
    promises of repayment from the son-in-law—that the parties to the
    transaction did not intend a gift. 
    Id. at 141-42.
    The presumption is plainly inapplicable here, as no transfer of property
    occurred. Rather, Decedent’s parents provided funds to help him pay off a
    balloon mortgage on the Pittsburgh Home, which Decedent already owned.
    -4-
    J-A23035-18
    Then, Decedent’s parents provided additional funds so that Decedent could
    replenish a tax-sheltered retirement account instead of paying taxes and
    penalties to the IRS. Neither the trial court nor the estate cites any law holding
    that a gift presumption applies under these circumstances.
    Furthermore, as in Hornyak, the record provides ample evidence that
    Decedent and his parents intended the funds to be a loan. Indeed, the record
    is devoid of evidence indicating otherwise. In her claim against the estate,
    Appellant documented an account she set up to receive, by wire transfer, the
    proceeds of Decedent’s sale of the French Property. Claim, 5/15/16, at ¶ 13
    and Attachment F.2 According to the claim, the Decedent satisfied $59,464.08
    of his debt to his parents from the proceeds of the French Property sale. 
    Id. at ¶
    17(e).
    At the hearing, Olver testified that he discussed with Decedent’s parents
    the possibility of making a gift to Decedent, and told them that, if they did so,
    they would need to file a tax return acknowledging the money as such.
    N.T. Hearing, 1/16/18 at 29. To Olver’s knowledge, Decedent’s parents filed
    no such return. 
    Id. at 29,
    47. Instead, Olver recommended structuring the
    transaction as a loan in order to avoid a significant gift tax, and that is how
    the parties proceeded. 
    Id. at 29.
    Furthermore, Olver testified that, “[b]ased
    on people of their age [90 and 87 as of the filing of the claim], I would not
    ____________________________________________
    2 In an apparent typographical error, the document lists the originator of the
    funds as “Richard M. Cowan” rather than Richard D. Cowan.
    -5-
    J-A23035-18
    have recommended that they extract $200,000 from their investment portfolio
    that would not be there for their own wellbeing.” 
    Id. at 48.
    Olver also referenced a chain of emails in which the Decedent wrote: “I
    can come up with what I can here, but if they loan me $50,000, would that
    finish this off?” 
    Id. at 31.
    Further, “Would this be a huge dilemma financially
    for them if this is just a loan to be repaid by a family member?” 
    Id. at 32.
    Olver testified that he would not have advised Decedent’s parents to take out
    a line of credit of $200,000.00 to make a gift. 
    Id. at 42-43.
    He advised that
    course of action only because they expected repayment. 
    Id. Olver testified
    that he recommended a note. 
    Id. at 43.
    As reflected above, the record does
    not establish that Decedent ever signed a note.
    Marcia Cowan, Decedent’s sister, testified about a promissory note that
    was prepared to “memorialize” the debt Decedent owed to his parents. 
    Id. at 63.
    She tried to get a copy of the note to Decedent through Kozhevnikova.
    
    Id. at 64.
    Kozhevnikova did not recall ever receiving the note and said she
    did not present a note to Decedent. 
    Id. at 85-86.
    As noted above, there is
    no evidence that Decedent signed it before his death. 
    Id. at 70-71.
    In summary, the trial court committed an error of law in relying upon
    an inapplicable gift presumption. Regardless of the presumption, the record
    contains clear and convincing evidence that the transactions in question were
    loans. The claim documents an account Appellant opened up and funded with
    a wire transfer from Decedent representing the proceeds of the sale of the
    -6-
    J-A23035-18
    French Property. Decedent’s debt to his parents was partially paid off from
    those funds.    Moreover, Olver testified that the parties structured the
    transaction as a loan in order to avoid a significant gift tax. He also testified
    that Decedent’s parents were not in position to gift the amount of money
    involved, given their ages and their financial resources. Olver also testified
    about emails in which Decedent expressly referred to the arrangement as a
    loan. The record clearly establishes that Decedent’s parents acted to help
    Decedent stave off financial calamities—first a mortgage foreclosure and then
    federal taxes and penalties on a tax-deferred retirement account. No evidence
    supports a finding that Decedent’s parents simply gifted money to him.
    The absence of a signed promissory note does not alter our conclusion.
    On the facts of this case, the absence of a signed note is not surprising.
    Decedent’s sister attempted to get the note to Decedent through his estranged
    wife, as Decedent was in France at the time. Kozhevnikova denied receiving
    the note or presenting it to him. Decedent’s failure to sign the note can be
    attributed to his sudden and unexpected passing, rather than his refusal to
    acknowledge the debt. As we have already discussed, there is no evidence
    that any party treated the money as a gift rather than a loan.
    In her second assertion of error, Appellant argues the trial court erred
    in refusing to admit into evidence two emails from Decedent’s email account
    in which he expressly referred to the transaction as a loan. Given our analysis
    of Appellant’s first issue, we find it unnecessary to resolve the second. The
    -7-
    J-A23035-18
    record contains clear and convincing evidence of a loan regardless of the
    disputed emails. Admission of the disputed emails would result in cumulative
    evidence, inasmuch as Olver testified to several emails in which Decedent
    acknowledged the debt.
    For all of the foregoing reasons, we reverse the trial court’s order and
    remand for further proceedings consistent with this Memorandum.
    Order reversed. Case remanded. Jurisdiction relinquished.
    Judgment Entered.
    Joseph D. Seletyn, Esq.
    Prothonotary
    Date: 3/19/2019
    -8-
    

Document Info

Docket Number: 312 WDA 2018

Filed Date: 3/19/2019

Precedential Status: Precedential

Modified Date: 3/19/2019