In re Estate of Pizzoferrato , 190 Ohio App. 3d 123 ( 2010 )

[Cite as In re Estate of Pizzoferrato, 190 Ohio App.3d 123, 2010-Ohio-4848.]
STATE OF OHIO, JEFFERSON COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
IN RE ESTATE OF PIZZOFERRATO. ) CASE NO. 08 JE 38
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CHARACTER OF PROCEEDINGS: Civil Appeal from the Court of Common
Pleas, Probate Division, of Jefferson
County, Ohio
Case No. 2008 ES 026
JUDGMENT: Final Account Exception Judgment –
Reversed and Remanded.
Concealment Judgment –
Affirmed and Modified in Part.
APPEARANCES:
Gary M. Stern, for appellee and cross-appellant.
Bruzzese & Calabria and Michael J. Calabria; and Rokisky & Associates and Jeffrey J.
Rokisky, for appellant and cross-appellee.
JUDGES:
Hon. Cheryl L. Waite
Hon. Gene Donofrio
Hon. Mary DeGenaro
Dated: September 27, 2010
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WAITE, Judge.
{¶ 1} Appellant, Joseph Pizzoferrato, appeals the decision of the Jefferson
County Court of Common Pleas, Probate Division, that overruled his exception to the
final account filed by appellee Frank Berardi, executor of the estate of Delores
Pizzoferrato. Berardi filed a cross-appeal challenging the trial court’s ruling on a
concealment complaint filed against appellant. For the following reasons, we reverse
the decision of the trial court as to appellant’s claims and enter judgment in his favor
accordingly. We sustain the trial court’s decision as to the concealment action in part
but reverse and modify in part.
{¶ 2} Berardi is the devisee of some of the decedent’s real property. Appellant,
who is the decedent’s brother, is the residuary beneficiary under the will. Appellant
argues that the probate court improperly allowed Berardi, in his role as executor, to
exonerate the mortgage lien that was associated with the property devised to Berardi in
the will. In this matter, appellant claims that Berardi transferred to himself estate assets
that should have gone to appellant through the estate. Appellant contends that the trial
court should have applied R.C. 2113.52(B), which provides that the right of exoneration
does not exist unless it is clearly included in the will with respect to the specific lien to
be exonerated. We disagree with appellant’s application of R.C. 2113.52(B), but based
on the record, we determine that Berardi is required to reimburse the estate for the
amount of the lien. For this reason, we sustain appellant’s assignment of error and hold
that Berardi is required to deposit $71,572.78 in the decedent’s estate for proper
distribution.
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{¶ 3} While we find no error in the reasonableness of the award of $1,650 in the
cross-appeal of this matter, the record reflects that the trial court failed to impose a
mandatory 10 percent penalty. The trial court’s judgment is thus reversed and modified
solely to assess an additional penalty of $165 against appellant. The remainder of the
trial court’s judgment is affirmed.
History of the Case
{¶ 4} Delores Pizzoferrato died on January 11, 2008, and her will was admitted
to probate in the Jefferson County Court of Common Pleas, Probate Division. Berardi
was named as executor in the will. The will directed that all the decedent’s debts be
paid as soon as practicable from the estate assets. Item III of the will contained a
specific devise and bequest to Berardi of real estate owned by the decedent “adjacent
to Route 43 in Wintersville,” along with all structures, improvements, personal property,
accounts receivable, and any other tangible or intangible assets connected with any
business enterprise being operated on the property. The decedent had operated a
restaurant and recycling center at this location, and Berardi worked there. The will left
the residuary estate, both real and personal, to appellant, the decedent’s brother. At the
time the decedent died, appellant was living with her in her home.
{¶ 5} The probate court approved Berardi’s appointment as executor. Berardi
filed an inventory and appraisal of the estate on March 11, 2008. The total estate
assets were listed at $560,398.11, with the real property valued at $465,000.
Miscellaneous household goods and personal effects were valued at $1,000. The
inventory listed three separate parcels of real property, including two parcels at 820 and
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840 Canton Road in Wintersville, valued at $140,000 and $75,000. Canton Road is
another name for Route 43 in Wintersville, and there is no dispute that the two
properties on Canton Road were devised to Berardi. The probate court approved the
inventory and appraisal on April 8, 2008.
{¶ 6} Berardi filed the final and distributive account on August 8, 2008. In the
list of disbursements, Berardi included the payment in full of the remaining debt arising
from two promissory notes to Huntington Bank in the amounts of $27,614.30 and
$43,958.48, together totaling $71,572.78. These notes were secured by an open-end
mortgage on the property at 840 Canton Road.
{¶ 7} Appellant filed an exception to the account on September 12, 2008. He
argued that Berardi’s payment of $71,572.78 to Huntington Bank constituted an illegal
exoneration of the mortgage in violation of R.C. 2113.52(B).
{¶ 8} On September 16, 2008, Berardi filed a concealment complaint against
appellant, alleging that he had concealed, embezzled, or conveyed away estate assets
from the decedent’s residence after her death. He asked for judgment in favor of the
estate for the value of the personal property together with a 10 percent penalty, along
with all costs of the proceedings including reasonable attorney fees. Berardi attached a
list of the decedent’s household goods that he alleged appellant took, along with their
approximate values. For purposes of the concealment action, he listed the retail value
of the goods at $21,170.00. To explain the discrepancy between the value of the goods
in the inventory as filed by Berardi and the value listed in the concealment action,
Berardi claimed that he initially did not intend to challenge the removal of the property
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and instead, listed the value in the inventory at $1,000. He changed his mind after
appellant filed objections to his accounting of the estate.
{¶ 9} The exception to the account and the concealment action were both heard
on October 28, 2008. Appellant admitted that he took all the personal household
property from the decedent’s home after her death. He could not give a value for the
property. He said that he gave away most of the items, although it was established that
he sold a lawn tractor for $1,000 and a television for $650. Both parties agreed that the
sale price of those two items established their value.
{¶ 10} Berardi testified that the original retail value of the decedent's household
property was $21,170 and that the market value of the goods at the time of her death
was $7,000. He did not explain how he arrived at this figure and admitted that he had
no training as an appraiser.
{¶ 11} On October 30, 2008, the probate court issued two judgment entries. In
the first entry, the judge overruled appellant's exception to the final account. The court
concluded, “[T]he account conforms to the directives set forth in the Will and complies
with Ohio law.”
{¶ 12} The second entry granted judgment in favor of Berardi on the concealment
action in the amount of $1,650. The court did not order prejudgment interest, attorney
fees, or a 10 percent penalty, but did assess $45.50 in court costs against appellant.
{¶ 13} On November 25, 2008, appellant filed a notice of appeal from the
judgment entry overruling his exceptions to the final account. On December 1, 2008,
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Berardi filed a notice of cross-appeal, challenging the decision rendered in the
concealment action.
{¶ 14} Appellant and Berardi each raise one assignment of error. As a
preliminary matter, it must be noted that Berardi should have filed a separate appeal in
this matter and not a notice of cross-appeal. His claims do not fall within the purview of
a true cross-appeal, since he is appealing an issue arising from a judgment entry wholly
separate and distinct from the entry referred to in appellant's notice of appeal.
{¶ 15} Procedurally, a cross-appeal is appropriate when a party seeks to defend
an order or appeal taken by another party, but also desires some change to that
judgment or order. App.R. 3(C)(1). However, because Berardi filed his notice of cross-
appeal within the time allowed to file a direct appeal, as set forth in App.R. 4(A), we will
exercise our discretion to accept the matter for review and address his assignment of
error.
Assignment of Error of Joseph Pizzoferrato
{¶ 16} “The Common Pleas Court of Jefferson County, Ohio, Probate Division
committed plain error when it failed to apply Ohio Revised Code 2113.52(B) to the case
at hand. Despite the statutory law, the Probate Court held to exonerate Frank Berardi
from mortgage lien obligations secured by real property of the probate estate of Delores
Pizzoferrato which had been devised to Frank Berardi, and thus made said mortgage
liens the obligation of the residuary estate of Delores Pizzoferrato, all in violation of Ohio
Revised Code 2113.52(B).”
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{¶ 17} Appellant contends that the trial court improperly allowed the decedent's
estate to exonerate the mortgage lien on the property that was devised to Berardi,
ignoring the language of R.C. 2113.52(B), which states:
{¶ 18} “If real estate devised in a will is subject to a mortgage lien that exists on
the date of the testator's death, the person taking the real estate under the devise has
no right of exoneration for the mortgage lien, regardless of a general direction in the will
to pay the testator's debts, unless the will specifically provides a right of exoneration that
extends to that lien.”
{¶ 19} Appellant argues that the real property devised to Berardi was burdened
with a mortgage lien and Berardi was required to accept the debt with the property. He
claims that Berardi, as executor, should not have paid the debt associated with the
mortgage because he was prohibited from doing so pursuant to R.C. 2113.52(B).
{¶ 20} Because this appeal challenges the probate court's interpretation and
application of statutory law, we apply a de novo standard of review. Riedel v. Consol.
Rail Corp., 125 Ohio St.3d 358, 2010-Ohio-1926, 928 N.E.2d 448, ¶6. Although
appellant's assignment of error refers to a “plain error” standard, the plain-error standard
of review does not apply here. Appellant appears to argue that the trial court plainly
ignored the applicable statute and asks this court to correct the error and apply R.C.
2113.52(B).
{¶ 21} Berardi, in response, argues that R.C. 2113.52(B) does not apply. He
claims that the loans he paid as executor were more in the nature of personal loans,
rather than mortgage loans, because they were also secured by an assignment of rents.
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Berardi contends that a debt that is secured by both a mortgage lien and a
nonmortgage lien should not fall under the purview of R.C. 2113.52(B) and that the
probate estate was permitted to satisfy the debt with estate funds.
{¶ 22} Neither appellant nor Berardi is correct in this case. R.C. 2113.52(B) is
not the primary law governing the outcome of this matter. R.C. 2113.52(B) involves the
right of exoneration, which is defined in Black's Law Dictionary (6th Ed.1990) as “The
removal of a burden, charge, responsibility or duty. Right to be reimbursed by reason of
having paid that which another should be compelled to pay * * *.” There is no indication
in the record of this case that Berardi, acting as devisee of the decedent's real property,
sought to be reimbursed for paying the debts associated with the liens on the devised
property or that he asked to have the estate remove those liens. Instead, Berardi, as
executor of the estate, paid Huntington Bank's claims as part of the normal course of
administering the decedent's estate. Huntington Bank requested that two promissory
notes be paid by the estate, and the payoff notices for the two loans are part of the
record. Payment appears to be proper because the promissory notes each contain
“death or insolvency” and acceleration clauses, entitling Huntington Bank to collect the
balance of the loans upon Delores Pizzoferrato's death. When an executor pays the
claims made against a decedent's estate, this act is not referred to as an exoneration. It
may be variously referred to as discharging the debts of the estate, allowing the claims
against the estate, or simply as paying the decedent's creditors, but it is not an
exoneration, as that act is defined.
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{¶ 23} Appellant claims that Berardi exonerated the mortgage lien in the final
accounting, but this is not a correct characterization of the act. The final account simply
notes that the estate paid, along with all the other claims against it, the two promissory
notes issued by Huntington Bank. Although this payment may have had some of the
same effects as an exoneration of the mortgage lien, the process used was not that of a
devisee seeking reimbursement for a payment he made, which is to say, exerting a right
of exoneration. In this instance, Berardi, as executor, properly paid Huntington Bank for
the balance of two business loans made to the decedent.
{¶ 24} It is our view that the correct statute to apply in this case is R.C.
2107.54(C), which states:
{¶ 25} “A devisee of real estate that is subject to a mortgage lien that exists on
the date of the testator's death, who does not have a right of exoneration that extends to
that lien because of the operation of division (B) of section 2113.52 of the Revised
Code, has a duty to contribute under this section to devisees and legatees who are
burdened if the claim secured by the lien is presented and allowed pursuant to Chapter
2117. of the Revised Code.”
{¶ 26} R.C. 2107.54(C) presumes that a claim secured by a lien on the
decedent's real property may be presented to the estate and the claim may be allowed
and paid by the estate under R.C. 2117. See, e.g., In re Estate of Mahan, 11th Dist.
No. 2005-T-0062, 2006-Ohio-4821. If the claim is allowed and paid by the estate, and if
the devisee has no right of exoneration by the operation of R.C. 2113.52(B), then a duty
arises in the devisee to contribute to any other devisees and legatees who may be
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burdened by the payment of the claim. In this particular case, the residuary beneficiary
was clearly burdened by the payment of the claim. Hence, the duty of contribution
should have been invoked.
{¶ 27} Appellant filed an exception to the final accounting raising the right of
exoneration under R.C. 2113.52(B), but failed to address the preliminary matter as to
whether it was proper for the estate to pay the claims presented by Huntington Bank. It
is understandable that the trial court overruled the exception, because the appropriate
law was not invoked and appellant was arguing that the estate should not have paid
Huntington Bank. However, due to the nature of the mortgage liens, the estate owed
Huntington Bank full payment. The question that remains is what further steps were
necessary before the devisee could take his property under the will. Because the next
step in the analysis does involve in some way the statute raised in appellant's exception
to the final account, and in the interest of substantial justice, we address whether
Berardi, as devisee, had a duty to contribute to the probate estate after the debts
secured by a mortgage lien had been properly paid by the estate.
{¶ 28} In this case, it is undisputed that the will provided no specific right of
exoneration extending to the mortgage lien in question. R.C. 2113.52(B) allows for a
right of exoneration only if there is a specific provision in the will that grants a right of
exoneration extending to the specific mortgage lien at issue. A general direction in the
will to pay the testator's debts does not suffice. Item III of the decedent's will states:
{¶ 29} “I give, devise and bequeath the real estate that I own adjacent to Route
43 in Wintersville, Jefferson County, Ohio, together with all structures, improvements
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and personal property situated thereon, and including any accounts receivable or other
assets, tangible or intangible, connected with any business enterprise being operated
thereon, to FRANK BERARDI, if he survives me.”
{¶ 30} This general clause does not provide a specific right of exoneration for the
mortgage lien on the property adjacent to Route 43 in Wintersville. Therefore, R.C.
2107.54(C) requires the devisee to contribute to the estate the amount the estate paid
to satisfy the claims secured by the mortgage lien.
{¶ 31} Berardi attempts to contravene the effects of R.C. 2107.54(C) and
2113.52(B) by characterizing the underlying debts on the property as personal or
business loans rather than mortgage loans. He relies primarily on the existence of an
assignment of rents, which he describes as an interest in personal property rather than
an interest in real property. He contends that the two promissory notes were
encumbered by personal assets of the decedent's restaurant business, and thus, were
personal loans and not simply real estate loans. It is not quite clear what Berardi is
attempting to achieve by this characterization, but in any case, he is incorrect. The
assignment of rents also included the assignment of the underlying leases and the
income derived from those leases. Thus, the assignment of rents involved both
personal property (the rents themselves) and real property (the leases). Whether an
assignment of rents refers to an interest in real or personal property, though, is largely
irrelevant. R.C. 2113.52(B) provides no exception with respect to the nature of the debt
that supports a mortgage. If real property is devised in a will and there is a mortgage
attached to the property, then without a specific statement allowing it, there is no right of
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exoneration, without regard to the manner in which the mortgage came into existence or
the nature of the debt associated with the mortgage.
{¶ 32} The record reveals that there was a mortgage lien associated with the
devised property, the residuary beneficiary was burdened by the payment of the two
promissory notes by the estate, and that Berardi, as devisee, is required to contribute
the amount of those payments back to the estate since he accepted the devised real
estate. Therefore, we sustain appellant's assignment of error. The trial court’s
determination on this matter is reversed, and we hold that Berardi is required to
reimburse the estate in the amount of $71,572.78.
Frank Berardi's Assignment of Error
{¶ 33} “It was against the manifest weight of the evidence and an abuse of
discretion for the trial court to fail to order Joseph Pizzoferrato to either return the estate
assets or pay the value of estate assets that he took from decedent's home after her
death, and refuse to assess the 10 per cent penalty mandated by statute.”
{¶ 34} In Berardi's assignment of error, he refers to the concealment action he
filed. Concealment actions are governed by R.C. 2109.52, which states:
{¶ 35} “When passing on a complaint made under section 2109.50 of the
Revised Code, the probate court shall determine * * * whether the person accused is
guilty of having concealed, embezzled, conveyed away, or been in the possession of
moneys, chattels, or choses in action of the trust estate. If such person is found guilty,
the probate court shall assess the amount of damages to be recovered or the court may
order the return of the specific thing concealed or embezzled or may order restitution in
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kind. * * * In all cases, except when the person found guilty is the fiduciary, the probate
court shall forthwith render judgment in favor of the fiduciary or if there is no fiduciary in
this state, the probate court shall render judgment in favor of the state, against the
person found guilty, for the amount of the moneys or the value of the chattels or choses
in action concealed, embezzled, conveyed away, or held in possession, together with
ten per cent penalty and all costs of such proceedings or complaint; except that such
judgment shall be reduced to the extent of the value of any thing specifically restored or
returned in kind as provided in this section.”
{¶ 36} Berardi argues that it was an abuse of discretion for the court to award
damages only for the two items that appellant admitted he sold from the estate, since he
also admitted that he took several other items. Berardi also argues that the probate
court should have assessed a mandatory penalty of 10 percent, as stated in R.C.
2109.52.
{¶ 37} With respect to the first subissue, a reviewing court uses an abuse-of-
discretion standard when reviewing a trial court's decision relative to an assessment of
damages. Roberts v. United States Fid. & Guar. Co. (1996), 75 Ohio St.3d 630, 634,
665 N.E.2d 664. “Abuse of discretion” means more than an error of law; rather, it
implies that the court's attitude is unreasonable, arbitrary, or unconscionable.
Blakemore v. Blakemore (1983), 5 Ohio St.3d 217, 219, 5 OBR 481, 450 N.E.2d 1140.
{¶ 38} The probate court did not abuse its discretion in determining the damage
award. Although Berardi testified that he considered the market value of the decedent's
household property to be $7,000, he gave no basis for arriving at that figure, and the
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probate court relied instead on the specific dollar amounts given by appellant as the
sale prices of a lawn tractor and a television. In rejecting Berardi's valuation, the trial
court made a credibility determination. We generally defer to the credibility
determinations of the trier of fact, which in this case was the probate judge. Seasons
Coal Co., Inc. v. Cleveland (1984), 10 Ohio St.3d 77, 80, 10 OBR 408, 461 N.E.2d
1273. Berardi admitted that he had none of the decedent's household property
appraised and that there was no basis for his own valuation of the market value of this
property at the time of decedent's death. His credibility also came into question when
he testified that he filed the concealment action only in retaliation for appellant's
decision to file an exception to the final account. Because the trial court had a basis for
valuing damages at $1,650, and there is nothing in the record that would have us
question the credibility determination made at trial, we find no abuse of discretion in the
trial court's award of damages.
{¶ 39} Turning to the issue of the 10 percent penalty, Berardi's argument is well
taken. Upon a finding of damages in a concealment action, R.C. 2109.52 mandates
that a 10 percent penalty be assessed. Again, this penalty is mandatory, not
discretionary. See, e.g., In re Estate of Tewksbury, 4th Dist. No. 05CA741, 2005-Ohio-
7107, ¶13; Sugar v. Sugar (Mar. 29, 1999), 7th Dist. No. 96CO4, 1999 WL 182513, at
*4-5. Therefore, the probate court's failure to order the 10 percent penalty in this case
was contrary to law. Accordingly, Berardi’s assignment of error is sustained in part, and
we modify the judgment in the concealment action to add a 10 percent assessment in
addition to the underlying award of damages.
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Conclusion
{¶ 40} Appellant's assignment of error is meritorious on other grounds. As
executor, Berardi properly paid the remaining debt on two promissory notes issued to
the decedent. As devisee, he was then required to contribute the amount of those
payments back to the decedent's estate based on the operation of R.C. 2107.54(C) and
2113.52(B). The judgment of the probate court on the exception to the final account is
reversed, and the cause is remanded with the direction to Berardi to deposit $71,572.78
into the probate estate for proper distribution. In addition, the trial court's judgment in
the concealment action is affirmed with respect to the damages award of $1,650, but
the judgment is reversed to the extent that it must be modified to add the statutorily
mandated penalty of 10 percent in the amount of $165, for a total judgment against
appellant in the sum of $1,815.
Judgment accordingly.
DONOFRIO and DEGENARO, JJ., concur.