Estate of: Sandra C. Lesser ( 2017 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
ESTATE OF: SANDRA C. LESSER, IN THE SUPERIOR COURT OF
DECEASED PENNSYLVANIA
APPEAL OF: LINDA WALTERS
No. 1295 EDA 2016
Appeal from the Order Entered March 15, 2016
In the Court of Common Pleas of Montgomery County
Orphans' Court at No(s): 2012-x3840
BEFORE: BOWES, J., OTT, J., AND FORD ELLIOTT, P.J.E.
MEMORANDUM BY BOWES, J.: FILED AUGUST 07, 2017
On appeal, Linda Walters, Esquire, challenges the orphans’ court’s
decision to reduce the amount of attorney’s fees paid to her from $45,000 to
$10,000 for her role in administering the present estate by surcharging her
in the amount of $35,000. Appellant also raises complaints about two
surcharges imposed upon the executrix. We affirm.
Sandra C. Lesser, a widow, died testate on November 2, 2012. On
November 7, 2012, the Register of Wills of Montgomery County admitted to
probate decedent’s last will and testament dated October 24, 2012, and it
granted letters testamentary to Theresa Buzzone Kehler, who was a close
friend of the decedent. In the will, Appellant was named as the attorney for
the estate. The will made various specific bequests to relatives, individuals,
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and three named charities: Hadassah, the Jewish Family Services, and the
Pennsylvania Society for the Prevention of Cruelty to Animals. Additionally,
decedent stated that certain charities, which she called her cat charities,
were to be given $5,000 each. Decedent left her residuary estate to the
Sandra C. Lesser Charitable Foundation, which decedent ordered to be
created by Ms. Kehler and Appellant and which was to benefit organizations,
individuals, and families in need. The estate was worth approximately
$1,450,000, and consisted of the decedent’s home, various bank accounts,
and bonds.
Thereafter, Appellant and Ms. Kehler executed a fee agreement calling
for Appellant to receive a flat commission of 3% of the value of the estate
for her legal services. Appellant and Ms. Kehler also executed a fee
arrangement for Ms. Kehler to receive a flat fee of 6% of the estate assets
as payment for serving as the estate’s personal representative. Appellant
told Ms. Kehler that she was not required to keep time records, and
Appellant likewise did not keep contemporaneous accounts to memorialize
the legal work that she performed for the estate.
Appellant represented the estate from November 2012, to September
2014, and she received $45,000 in attorney’s fees by July 3, 2013. In
September 2014, due to her concern that matters were not being
completed, Ms. Kehler retained Michael Mills, Esquire, as the estate attorney.
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The first and final account for the estate was prepared, and the
Commonwealth, as parens patriae for the Sandra C. Lesser Charitable
Foundation, filed objections. It sought various surcharges against the
executrix and a reduction in the amount of attorney’s fees paid to Appellant.
The orphans’ court held hearings on the objections in May and June of 2015.
At those proceedings, Appellant reported that she expected to be paid the
agreed-upon flat fee of 3% of the gross value of estate and did not keep
time records. Appellant substantiated that she answered calls and emails
from Ms. Kehler, advertised the estate, and notified the estate beneficiaries
of their interests. Appellant presented a compilation of time records that she
prepared after-the-fact, when the amount of her attorney’s fees were
challenged. She maintained that she performed approximately 154 hours of
legal work.
Appellant admitted that she had little experience administering
estates, and failed to complete either the inheritance tax return or the
income tax returns for the decedent and the estate. Those returns were
instead prepared by an accountant, who was paid by the estate for those
services. In addition, Appellant neither obtained court approval for the sale
of the decedent’s real estate to an interested party nor did she prepare the
estate’s first and final account, which Mr. Mills completed.
The following events are also pertinent. In addition to telling Ms.
Kehler that she could receive an executrix fee of 6% of the estate assets
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without keeping records, which resulted in a surcharge against Ms. Kehler,
Appellant advised Ms. Kehler that she could sell the decedent’s home to Ms.
Kehler’s husband, who planned to transfer the home into his name and that
of Ms. Kehler. The house was purchased for $5,000 below its appraised
value. Then, Appellant allowed the sale to proceed at that price, even
though the estate paid for improvements to the home that were not taken
into account in the appraisal. After the agreement for sale was reached,
Appellant told Ms. Kehler to obtain a real estate agent to perform the
transaction and incorrectly informed the executrix that using a real estate
agent would prevent a court from determining that Ms. Kehler engaged in
self-dealing when she bought the house for less than fair market value. This
advice, regarding the real estate sale, resulted in the estate having to pay
an unnecessary real estate commission, and the imposition of surcharges on
Ms. Kehler. Without obtaining an estimate from a cleaning service,
Appellant informed Ms. Kehler that she could charge a flat fee of $10,000 for
cleaning the decedent’s home. The orphans’ court determined that $5,000
was an appropriate payment for cleaning the house and surcharged Ms.
Kehler for the other $5,000.
In addition, Appellant permitted the executrix to donate $5,000 to a
charity not listed in the will. As noted, the will left $5,000 to certain
charities that Ms. Lesser called her cat charities. The will further delineated
that the list of cat charities could be found in a folder on her dining room
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table. The folder was never recovered, and, without ascertaining whether it
was a cat charity of the decedent and without court approval, Appellant
advised Ms. Kehler to donate $5,000 to the Montgomery County Society for
the Prevention of Cruelty to Animals. The executrix was surcharged for that
payment.
After conducting the hearings, the orphans’ court found Appellant’s
$45,000 fee to be patently unreasonable in light of the work she performed
and the incorrect advice that she had disseminated to the executrix. It
reduced her attorney’s fees to $10,000, and ordered Appellant to return
$35,000 to the estate. Appellant filed exceptions wherein she objected to
the surcharges imposed upon Ms. Kehler, but did not contest the reduction
in her attorney’s fee. An en banc panel of the orphans’ court upheld the
initial orphans’ court’s decision in an order dated March 15, 2016.
Appellant filed a timely notice of appeal on April 14, 2016. She raises
the following issues for our review:
I. Did the orphans’ court commit reversible error when it
surcharged the attorney’s fee of Linda Walters, Esquire, in the
amount of $35,000.00, reducing said fee from $45,000.00 to
$10,000.00?
II. Did the orphans’ court commit reversible error when it
surcharged executrix, Theresa Buzzone Kehler, $5,000.00 of the
$10,000.00 which was paid for the purpose of cleaning out the
decedent’s home, located at 845 Valley Green Drive?
III. Did the orphans’ court commit reversible error when it
surcharged executrix, Theresa Buzzone Kehler, in the amount of
$5,000.00 for her distribution to the Montgomery County SPCA
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in accordance with the decedent’s will, which specified that the
aforementioned funds be delivered to “cat charities?”
Appellant’s brief at 4 (unnecessary capitalization omitted).
Appellant’s first issue involves the orphans’ court reduction of her
attorney’s fees. The Commonwealth maintains that Appellant waived this
issue because she failed to preserve it by including it in her exceptions. The
Pennsylvania Orphans’ Court Rules govern the filing of exceptions. When
the present matter was litigated, the following orphans’ court rule applied:
(a) General Rule.... [N]o later than twenty (20) days after entry
of an order, decree or adjudication, a party may file exceptions
to any order, decree or adjudication which would become a final
appealable order under Pa.R.A.P. 341(b) or Pa.R.A.P. 342
following disposition of the exceptions. . . . Failure to file
exceptions shall not result in waiver if the grounds for
appeal are otherwise properly preserved.
Pa.O.C.R. 7.1(a) (repealed) (emphases added).1
The Pennsylvania Supreme Court has long held that “[i]ssue
preservation is foundational to proper appellate review.” In the Interest of
F.C. III, 2 A.3d 1201, 1211 (Pa. 2010). Any issues raised on appeal must
have been addressed at the trial court level in order to ensure the trial court
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1
The new rule pertaining to exceptions in orphans’ court proceedings,
Pa.O.C.R. 8.1, did not take effect until September 1, 2016, after completion
of the final adjudication and filing of this timely appeal. That rule states:
“Except as provided in Rule 8.2 [relating to motions for reconsideration], no
exceptions or post-trial motions may be filed to any order or decree of the
court.” Pa.O.C.R. 8.1.
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had an opportunity to consider the claim. In re Estate of Smaling, 80
A.3d 485, 491 (Pa.Super. 2013) (en banc). This principle permits a trial
court to “correct errors as early as possible, advances the efficient use of
judicial resources, and implicates concepts of fairness and expense.” F.C.
III, supra at 1212.
We interpreted Pa.O.C.R. 7.1 in Smaling, supra. Therein, the
proposed probate of a will was challenged as procured by undue influence
and that the decedent lacked testamentary capacity when it was executed.
At an orphans’ court’s hearing, both the proponent and challenger of the will
presented countervailing proof on the issues in question. The orphans’ court
determined that the will was invalid on both grounds; the will proponent did
not file exceptions, directly appealing to this Court. Reversing a panel
decision to the contrary, the en banc Smaling Court found that both
challenges to the will were preserved despite the fact that no exceptions
were filed. We noted that the orphans’ court had the opportunity to rule on
the weight claims raised on appeal when it considered the evidence
presented to it and then rendered its determination as to the will’s validity.
Thus, the allegations in question were “otherwise properly preserved” by the
presentation of evidence by the will proponent.
In the instant case, Appellant challenges the orphans’ court’s decision
to reduce her fees. This issue was thoroughly examined and ruled upon by
the orphans’ court after hearings where Appellant presented testimony in
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support of her position that she was entitled to retain the $45,000 that she
was paid. The en banc orphans’ court adopted, as its Pa.R.A.P 1925(a)
opinion, the initial decision rendered by the hearing court, which addressed
all of the issues Appellant now raises on appeal. Under former Pa.O.C.R.
7.1, Appellant was not required to raise her issues in exceptions, and she
does not raise any new issues not addressed by the orphans’ court. We
therefore find, under the reasoning employed in Smaling, that Appellant’s
first issue was properly preserved by presentation of evidence on the subject
matter.
We now address Appellant’s challenge to the orphans’ court’s decision
to order her to reimburse $35,000 of the $45,000 that she received in
attorney’s fees from the estate. Our standard of review in this matter 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. However, we are not constrained to give the same
deference to any resulting legal conclusions. The Orphans’ Court
decision will not be reversed unless there has been an abuse of
discretion or a fundamental error in applying the correct
principles of law.
In re Fiedler, 132 A.3d 1010, 1018 (Pa.Super. 2016) (citations and
quotation marks omitted).
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In In re Estate of Rees, 625 A.2d 1203, 1206 (Pa.Super. 1993), we
observed: “The determination of the reasonableness of a fiduciary's
compensation is left to the sound discretion of the Orphans' Court.” The
amount of attorney’s fees that can be charged to an estate “are based on
the reasonable value of the service actually rendered.” Id. at 1206.
Attorneys “seeking compensation from an estate have the burden of
establishing facts which show the reasonableness of their fees and
entitlement to the compensation claimed.” Id. The orphans’ court is
authorized “to reduce to a ‘reasonable and just’ level those fees and
commissions claimed by the fiduciary and their counsel.” Id. We will not
overturn an orphans’ court’s decision to disallow attorney’s fees “absent a
clear error or an abuse of discretion[.]” Id.Appellant appears to have based her fee at least partially on the
schedule outlined by Johnson’s Estate, 4 Fid.Rep.2d 6 (Del. Co. 1983),
which calculates attorney’s fees upon a percentage of the assets under
administration.2 The schedule in question was reproduced in In re Estate
of Preston, 560 A.2d 160, 163 (Pa.Super. 1989):
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2
In In re Johnson's Estate, the orphans’ court indicated that the schedule
was approved by the Attorney General as the fees to be charged by
attorneys for probating estates. See 19A West's Pa. Prac., Probate & Estate
Administration § 38:1, comment 1. However, “the Attorney General's Office
subsequently indicated that it has no such guidelines.” Id. (citing In re Nix
Estate, 8 Fiduc. Rep. 2d 179 (Pa. C.P. 1988)).
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Per col. Per total
$ 00.01 to $ 25,000.00 7% 1,750.00 1,750.00
$ 25,000.01 to $ 50,000.00 6% 1,500.00 3,250.00
$ 50,000.01 to $ 100,000.00 5% 2,500.00 5,750.00
$ 100,000.01 to $ 200,000.00 4% 4,000.00 9,750.00
$ 200,000.01 to $1,000,000.00 3% 24,000.00 33,750.00
$1,000,000.01 to $,2,000,000.00 2% 20,000.00 53,750.00
In Preston, we ruled that a percentage fee structure cannot be used
to justify attorney’s fees that would otherwise be considered unreasonable.
This Court stated that, while “as a matter of convenience the compensation
of a fiduciary may be arrived at by way of percentage, the true test is always
what the services were actually worth and to award a fair and just
compensation therefor[.]” Id. at 165 n.11.
Our Supreme Court has outlined the factors to be considered when a
trial court determines an attorney’s fees:
the amount of work performed; the character of the services
rendered; the difficulty of the problems involved; the
importance of the litigation; the amount of money or value of
the property in question; the degree of responsibility incurred;
whether the fund involved was 'created' by the attorney; the
professional skill and standing of the attorney in his profession;
the results he was able to obtain; the ability of the client to pay
a reasonable fee for the services rendered; and, very
importantly, the amount of money or the value of the property in
question.
In re LaRocca’s Trust Estate, 246 A.2d 337, 339 (Pa. 1968).
Importantly, an estate counsel must “exercise the required degree of skill,
knowledge and diligence, and [where an attorney’s] negligence results in
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loss or waste to the estate, the court may impose a surcharge by way of
awarding reduced compensation or no compensation at all.” In re Estate
of Westin, 874 A.2d 139, 147 (Pa.Super. 2005) (citation omitted).
After review of the briefs, record, and applicable law, we conclude that
the orphans’ court did not abuse its discretion in concluding that $10,000
was the reasonable value of the services actually rendered by Appellant.
Appellant was inexperienced in the handling of estates, and she failed to
perform the ordinary estate administration services, including the
preparation of the estate inheritance and income tax returns, the decedent’s
final income tax return, and the first and final account.
Appellant also repeatedly failed to properly counsel the executrix on
the proper administration of the estate, resulting in the imposition of
numerous surcharges on Ms. Kehler. Appellant incorrectly advised the
executrix not to keep contemporaneous time records of her activities.
Appellant allowed the executrix to engage in self-dealing when she
purchased estate property for less than its actual market value. Then,
Appellant improperly directed Ms. Kehler to sell the property with the use of
a real estate agent, which only incurred more estate expenses and did not,
contrary to Appellant’s perception, cure any problem associated with a
below-fair-market sale of estate assets to Ms. Kehler’s husband. Finally,
Appellant advised the executrix, without court permission, to donate part of
the estate to a charity not listed in decedent’s will.
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It was within the orphans’ court’s discretion to assess the credibility
and weight that should be afforded Appellant’s testimony that she spent 154
hours on estate matters, and it was not required to accept her time record
compiled ex post facto. Further, it was within the sound discretion of the
orphans’ court to balance the factors for determining attorney’s fees. The
record supports the orphans’ court’s decision, and we therefore affirm its
decision reducing Appellant’s fees from $45,000 to $10,000.
As to Appellant’s second and third issues, we agree with the
Commonwealth that Appellant lacks standing to challenge the surcharges
imposed upon the executrix. Our Supreme Court has stated:
A party seeking judicial resolution of a controversy in this
Commonwealth must, as a prerequisite, establish that he has
standing to maintain the action." Bergdoll v. Kane, 731 A.2d
1261, 1268 (Pa. 1999) (citation omitted). Our Commonwealth's
standing doctrine is not a senseless restriction on the utilization
of judicial resources; rather, it is a prudential, judicially-created
tool meant to winnow out those matters in which the litigants
have no direct interest in pursuing the matter. Such a
requirement is critical because only when "parties have sufficient
interest in a matter [is it] ensured that there is a legitimate
controversy before the court." In re T.J., 739 A.2d 478, 481
(Pa. 1999).
In re Hickson, 821 A.2d 1238, 1243 (Pa. 2003). For a litigant to have the
requisite standing to maintain an action, she must have been aggrieved by
the matter or ruling that she seeks to challenge. Rellick-Smith v. Rellick,
147 A.3d 897 (Pa.Super. 2016) (citing Office of Governor v. Donahue, 98
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A.3d 1223, 1229 (Pa. 2014)). A party’s interest must be substantial, direct,
and immediate. Donahue, supra at 1229.
In the instant case, Appellant’s second and third issues both address
surcharges imposed upon Ms. Kehler. Appellant no longer represents the
estate, and, concomitantly, she does not represent the executrix, who is not
a named appellant. Appellant is not required to pay the estate the
surcharges imposed upon the executrix, and cannot be considered aggrieved
by the rulings rendered on those issues. Hence, Appellant lacks standing to
challenge any surcharges imposed upon Ms. Kehler, and she cannot litigate
the second and third issues raised on appeal.
In conclusion, we find that the orphans’ court did not abuse its
discretion in surcharging Appellant in the amount of $35,000, and that
Appellant does not have standing to challenge the court’s rulings with
respect to surcharges imposed upon the executrix.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/7/2017
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