In Re:Estate of Krasinski, S. Appeal of:Krasinski , 188 A.3d 461 ( 2018 )

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2018 PA Super 130IN RE: ESTATE OF SOPHIA M. : IN THE SUPERIOR COURT OF
KRASINSKI A/K/A SOPHIA : PENNSYLVANIA
KRASINSKI A/K/A SOPHIA :
KRASINSKY LATE OF MORRISDALE :
(COOPER TOWNSHIP), CLEARFIELD :
COUNTY, PENNSYLVANIA DECEASED :
NOVEMBER 4, 2006 :
:
: No. 1265 WDA 2015
APPEAL OF: ESTATE OF SOPHIA M. :
KRASINSKI AND ITS EXECUTOR, :
EDWARD KRASINSKI :
Appeal from the Order July 16, 2015
In the Court of Common Pleas of Clearfield County
Orphans' Court at No(s): 1707-0003
IN RE: ESTATE OF SOPHIA M. : IN THE SUPERIOR COURT OF
KRASINSKI, A/K/A SOPHIA : PENNSYLVANIA
KRASINSKI A/K/A SOFIA :
KRASINSKY, LATE OF MORRISDALE, :
(COOPER TOWNSHIP) CLEARFIELD :
COUNTY, PENNSYLVANIA DECEASED :
ON 11/04/06 :
:
: No. 1289 WDA 2015
APPEAL OF: PATRICIA KRASINSKI- :
DUNZIK :
Appeal from the Order July 16, 2015
In the Court of Common Pleas of Clearfield County
Orphans' Court at No(s): No. 1707-0003
BEFORE: GANTMAN, P.J., BENDER, P.J.E., BOWES, J., SHOGAN, J.,
LAZARUS, J., OLSON, J., OTT, J., STABILE, J., and DUBOW, J.
OPINION BY OTT, J.: FILED MAY 15, 2018
The Estate of Sophia M. Krasinski (the Estate) through its executor,
Edward Krasinski (Edward or the Executor), appeals from the order entered
on July 16, 2015, which granted in part and denied in part exceptions to the
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order confirming the first and final account of the Estate. Patricia Krasinski-
Dunzik (Patricia) also appeals from that order. Upon review, we affirm in part,
vacate in part, and remand for proceedings consistent with this opinion.
I. Background
This matter arises from a dispute among siblings over the distribution
of the real property from the Estate of their mother, Sophia M. Krasinski (the
Decedent). The Decedent had four children: Patricia, who is married to Gary
Dunzik (Gary) (collectively, the Dunziks); Eleanor J. Krasinski (Eleanor);
James P. Krasinski (James); and Edward.
Decedent died testate on November 4, 2006, and the Will was probated
and an Estate opened in 2007. Pursuant to the terms of her will, Edward was
named as executor of the Estate and granted letters testamentary. The will
directed that the Decedent’s debts and funeral expenses be paid from the
assets of the Estate, and that the residue of the Estate be left in equal shares
to the Decedent’s four children.
The primary assets of the Estate included three parcels of real estate.1
Those parcels were: 1) 20 acres of property with an appraised value of
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1 The Executor did not obtain a date-of-death appraisal for the properties.
Instead, the Executor had the properties professionally appraised in 2010 in
conjunction with his petition for private sale. See N.T., 9/5/2014, at 62
(“appraisal done in 2010”).
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$55,000 (Johnny Hoover Place);2 2) a barn and 95 acres of property, which
includes 68 acres of coal rights, with an appraised value of $230,000 (Wicks’
Place);3 and 3) a house, buildings, and 98.84 acres with an appraised value
of $200,000 (Homestead Place).4
On July 7, 2010, Edward, in his capacity as Executor of the Estate, filed
a petition to permit the private sale of real estate to heirs. In that petition,
Edward averred that Patricia was objecting to the distribution of all three
properties because it was her position she already owns all of them based on
a prior oral agreement between herself and the Decedent. After argument
and briefing, on March 22, 2011, the orphans’ court granted the Executor’s
petition to permit private sale of the real estate. Specifically, the orphans’
court concluded that Patricia did not produce a writing to satisfy the
requirements of the statute of frauds to prove that she owned these
properties. The orphans’ court also concluded that Patricia did not present
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2 The tax-assessed value of this parcel was $6,798.10.
3 The tax-assessed value for this parcel was $40,866.37. This property
surrounds James’s home. Johnny Hoover Place and Wicks’ Place are adjoining
properties.
4 The assessed value for this parcel was $35,784.74. The Dunziks built the
house and barn on Homestead Place and reside there. The proposed deeds
for both Johnny Hoover Place and Homestead Place included a provision that
a right of way be established from Johnny Hoover Place through Homestead
Place to give Johnny Hoover Place access to the public road.
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sufficient evidence to remove the purported oral contract from the statute of
frauds.5
Prior to the sale, on February 8, 2013, letters were sent by the Estate’s
attorney to all four heirs explaining the process by which the sale would
occur.6 Included in this letter was a statement indicating that if the Dunziks
did not purchase all of the property of Homestead Place, there would be steps
taken to ensure they could maintain ownership of the home and barn on the
property. See Plaintiff’s Exhibit 30 (Estate’s Attorney’s Letter, 2/8/2013).
The private sale was conducted on February 15, 2013. Edward, James,
and Patricia attended the sale.7 Patricia did not bid on any of the properties.
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5The private sale was delayed further after the Dunziks filed a civil complaint
against the Estate. On December 24, 2012, after a non-jury trial, the trial
court found that there was no oral contract between the Decedent and Patricia
and dismissed the case.
6 The Estate’s attorney’s letter stated, inter alia, that all heirs were permitted
to utilize their proportionate shares of the value of the Estate towards the
purchase price of any property with any difference to be paid in cash upon
approval by the orphans’ court. The share of each heir was approximately
$100,000.00. See Trial Court Opinion, 4/22/2015, at 3 n.2.
7 Eleanor filed a document disclaiming her rights to the Estate and assigning
her proportionate share to Patricia. Patricia appeared for the private sale,
gave the Estate’s attorney Eleanor’s filing, said she would not be bidding as
she owned the property, and then left immediately thereafter. See N.T.,
9/5/2014, at 29, 71-22. See also Orphans’ Court Opinion, 4/22/2015, at 2
(“The evidence presented before the Court showed that [Patricia] announced
she was not going to remain at the sale. [Patricia] then provided a copy of a
Relinquishment of Rights to Inherit signed by her sister Eleanor Krasinski and
left [the Estate’s attorney’s] office while making various threats to stop the
sale from going through.”) (footnote omitted).
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James and his wife, Marie, bid $230,000 for Wicks’ Place. Edward bid $55,000
for Johnny Hoover Place. Edward, James, and Marie jointly bid $120,000 for
Homestead Place.
On March 7, 2013, the Executor petitioned the orphans’ court to approve
the sale of these properties to the residuary heirs for these amounts. Contrary
to the letter of the Estate’s attorney, no provision for Patricia and her
husband’s ownership of the house and barn at Homestead Place was included
in the deeds. On March 14, 2013, Patricia filed pro se an objection to the
petition.8 On April 30, 2013, after argument, the orphans’ court approved the
Executor’s petition.
On May 30, 2014, the Executor filed a first and final account. Patricia,
through counsel, filed six objections. Those objections challenged: 1) the
manner in which the private sale was conducted; 2) the failure to include a
limiting condition regarding the Dunziks’ home and barn and underlying land
in the Homestead Place deed; 3) the proposal to sell Homestead Place with a
right-of-way from Johnny Hoover Place; 4) the appraised values of the
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8This handwritten objection, consisting of 5 pages with writing on both sides
except for the last page, includes numerous allegations about how James and
Edward treated Decedent while she was dying. Patricia also averred that
Edward was taking payments for the gas leases and not giving them to the
Estate. She further claimed both Edward and James assaulted her in the past.
Additionally, she claimed she owned some mineral rights in the properties.
Patricia did not specifically object on the basis that no provision was made for
ownership of the lands underlying her house and barn at Homestead Place.
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properties as either suppressed or inflated; and 5) tax implications related to
the Executor’s report to the Internal Revenue Service that Patricia sold her
interest in the land, and the Executor’s date of death valuation of the real
estate. Objection No. 6 was a series of miscellaneous objections, and is
discussed in section III, infra, as that objection relates solely to the Executor’s
appeal.
A hearing was held on all objections on September 5, 2014. Testimony
and evidence were sparse at this hearing and the majority of the testimony
did not relate to the objections filed by the Dunziks. Furthermore, Patricia did
not appear; however, both her husband, Gary, and the Dunziks’ attorney
appeared.
On September 10, 2014, the orphans’ court ordered Patricia to file a
brief within 30 days, and also provided the Executor 20 days thereafter to
respond. Patricia did not file a brief, but the Executor filed answers to the
objections on October 27, 2014.
On April 22, 2015, the orphans’ court entered an order and opinion in
this matter. The orphans’ court sustained, in part, Objection No. 6, finding
that natural gas payments received by the Estate for Homestead Place in the
amount of $39,536.00 were the property of Patricia and not the Estate, and
directed the filing of an Amended Account to remove the $39,536.00 from the
Estate. The orphans’ court overruled the remaining objections. With respect
to Objection Nos. 1 through 4, concerning the private sale of the properties,
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the orphans’ court concluded these issues were waived because they should
have been raised in an appeal from the order confirming the private sale on
April 30, 2013, pursuant to Pennsylvania Rule of Appellate Procedure
342(a)(6) (order “determining an interest in real … property” appealable as of
right). As to Objection No. 5, tax ramifications, the orphans’ court concluded
that the Executor acted appropriately.
On May 4, 2015, Patricia filed a motion for reconsideration, contending,
inter alia, the April 30, 2013 order approving the private sale was
interlocutory; the Executor and James and his wife removed a significant
amount of timber from Homestead Place; the party who sold the Decedent’s
real estate was the Executor, and not Patricia; and seeking a revised account
that properly reflected the value of the land on the date of the Decedent’s
death as the appraised value, and retraction of improper tax filing. 9 On May
13, 2015, the orphans’ court granted Patricia’s motion for reconsideration and
set argument on two issues. Those issues included: 1) whether the April 30,
2013 order was a final order, and 2) whether the value of timber removed
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9 A motion for reconsideration was procedurally improper in this case. At that
time, the Pennsylvania Orphans’ Court Rules provided for exceptions. See
former Pa.O.C. Rule 7.1(a) (“[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. If
exceptions are filed, no appeal shall be filed until the disposition of
exceptions[.]”).
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from the property was included properly in the account.10 See Order,
5/13/2015. By order entered July 16, 2015, the orphans’ court rescinded the
May 13, 2015, order, construed Patricia’s motion for reconsideration as
exceptions, and dismissed those exceptions.11 The orphans’ court also
dismissed the exceptions filed by the Executor concerning ownership of the
gas and oil rights to Homestead Place.
The Executor timely filed a notice of appeal, and Patricia filed a cross
appeal.12 A divided panel of this Court affirmed the orphans’ court’s order in
part, vacated in part, and remanded for further proceedings. Thereafter,
Patricia sought en banc review, which this Court granted. The matter is now
ready for our disposition.13
In considering both appeals, we bear in mind our well-settled standard
of review.
The [o]rphans’ [c]ourt decision will not be reversed unless there
has been an abuse of discretion or a fundamental error in applying
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10 The record is not clear as to when any issue about timber was raised for the
first time.
11The record does not contain a transcript of a hearing, and it is not clear
whether a hearing was actually held.
12 The Executor, Patricia, and the orphans’ court complied with Pa.R.A.P. 1925.
13On May 23, 2017, this Court issued a Rule to Show Cause (RTSC) to both
parties, directing them to show cause as to the basis of this Court’s jurisdiction
over these appeals.
Based on the parties’ responses to the RTSC, we are satisfied that this
Court has jurisdiction and the RTSC is hereby discharged.
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the correct principles of law. This Court’s standard of review of
questions of law is de novo, and the scope of review is plenary, as
we may review the entire record in making our determination.
When we review questions of law, our standard of review is limited
to determining whether the [orphans’] court committed an error
of law.
In re Fiedler, 132 A.3d 1010, 1018 (Pa. Super. 2016) (citations and
quotation marks omitted). For ease of discussion, we begin with Patricia’s
appeal.
II. Patricia’s Appeal
We first consider Patricia’s arguments related to the private sale of
property that occurred on February 15, 2013. She argues that the orphans’
court erred in permitting the private sale that only allowed the heirs to
participate in the bidding because it “was never intended to and did not, in
fact, maximize the value of the real estate for the benefit of all of the heirs[.]”
Patricia’s Brief at 13. Patricia also argues that she was not given adequate
notice of the sale. Id. at 15. Patricia further contends that there was no need
for the Executor to offer Homestead Place for sale with a right of way in favor
of Johnny Hoover Place, except to serve as an impediment and deterrent to
her and her husband’s purchase of Homestead Place. Id. at 16-17. Patricia
also argues that James and Edward “changed[d] the terms of the sale” of
Homestead Place by failing to recognize ownership by Patricia and her
husband of the home and barn, the lands underlying the home and barn, and
the appurtenant facilities servicing them in the deed. Id. at 18.
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The orphans’ court concluded that Patricia waived these issues by failing
to appeal from the April 30, 2013 order confirming and approving the private
sale, as required by Pennsylvania Rule of Appellate Procedure 342. See
Orphans’ Court Opinion, 4/22/2015, at 8, citing Pa.R.A.P. 342(a)(6) and (c).
As more fully discussed below, we agree with the orphans’ court’s
determination.
Effective February 12, 2012, Pa.R.A.P. 342 provides, in relevant part:
(a) General rule. An appeal may be taken as of right from the
following orders of the Orphans’ Court Division: …
(6) An order determining an interest in real or personal property;
….
****
(c) Waiver of objections. Failure to appeal an order that is
immediately appealable under paragraphs (a)(1)-(7) of this rule
shall constitute a waiver of all objections to such order and such
objections may not be raised in any subsequent appeal.
Pa.R.A.P. 342(a)(6), (c).
At the outset, it is important to recognize that the Executor had the
authority to sell the Decedent’s real estate, pursuant to Sections 3311(a) and
3351 of the Probate, Estate and Fiduciaries (PEF) Code. 14 Furthermore, the
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14 Specifically, Section 3311(a) of the PEF Code provides:
A personal representative shall have the right to and shall take
possession of, maintain and administer all the real and personal
estate of the decedent, except real estate occupied at the time of
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orphans’ court authorized the Executor to sell the real estate by private sale
to the heirs by order entered March 22, 2011. The private sale took place on
February 15, 2013. Thereafter, on April 30, 2013, the orphans’ court
approved the sale and ordered the properties conveyed to the grantees. See
Order, 4/30/2013.
By way of background to the adoption of current Rule 342, we begin
with the Pennsylvania Supreme Court’s decision in In re Estate of Stricker,
977 A.2d 1115 (Pa. 2009), which involved the prior version of Rule 342. In
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death by an heir or devisee with the consent of the decedent. He
shall collect the rents and income from each asset in his
possession until it is sold or distributed, and, during the
administration of the estate, shall have the right to maintain any
action with respect to it and shall make all reasonable
expenditures necessary to preserve it. The court may direct the
personal representative to take possession of, administer and
maintain real estate so occupied by an heir or a devisee if this is
necessary to protect the rights of claimants or other parties.
Nothing in this section shall affect the personal
representative’s power to sell real estate occupied by an
heir or devisee.
20 Pa.C.S. § 3311(a) (emphasis added). Additionally, Section 3351 states:
Except as otherwise provided by the will, if any, the
personal representative may sell, at public or private sale,
any personal property whether specifically bequeathed or not, and
any real property not specifically devised, and with the
joinder of the specific devisee real property specifically devised. …
20 Pa.C.S. § 3351 (emphasis added).
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Stricker, our Supreme Court held that an orphans’ court’s order directing the
co-executors to sell the estate’s real estate was an interlocutory order that
was not appealable under Rule 342 or Rule 313 (collateral order). At that
time, under Rule 342, the determination of the finality of an order “making a
distribution, or determining an interest in realty or personalty or the status of
individuals or entities” was left to the discretion of the orphans’ court.
Stricker, at 1117-1118. Because the orphans’ court judge had not certified
the order to sell the estate’s real estate as final, the Stricker Court ruled the
order was not appealable under Rule 342. The Stricker Court further
determined the order did not qualify as a collateral order appealable pursuant
to Rule 313. Therefore, the order of this Court quashing the appeal was
affirmed.
In a concurring opinion, Mr. Justice Saylor wrote:
The majority aptly observes that our Rules of Appellate
Procedure contain a vehicle to address the particularized concerns
arising from orders determining interests in estate property.
Specifically, Rule 342 permits an appeal from a distribution order
or an order determining an interest in estate property to proceed
as of right, inter alia, upon a determination of finality by the
orphans’ court. See Pa.R.A.P. 342(1). The majority correctly
interprets the rule as investing absolute, largely standardless
discretion in the orphans’ court. I differ, however, with the
majority’s categorical assessment regarding the wisdom of the
rule in this regard. See Majority Opinion, slip op. at 4.
In my view, there are substantial arguments to be made
that estate administration would be better served by a rule
providing for the general appealability of estate-related orders
determining property interests at least in the real property setting.
Notably, the present “determination of finality” procedure does
not closely align with the justifications for permitting immediate
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appeals (facilitating the prompt resolution of potential title
disputes to benefit purchasers, the estate, and beneficiaries).
Further, the vesting of absolute, standardless discretion in our
orphans' courts yields the potential for disparate treatment. …
****
… Thus, I believe our Appellate and Orphans' Court
Procedural Rules Committees should continue to study the
application of the present rule in practice and make
recommendations for improvements where appropriate,
particularly given the troubling implications of maintaining a
system based on absolute, largely standardless discretion.
Id. at 1120-1121 (Saylor, J., concurring).
Thereafter, Rule 342 was revised, effective February 12, 2012. The
revised rule eliminated the requirement that the orphans’ court make a
determination of finality, and identified certain orders that would be
appealable as of right.15 The Rule specifically states that objections to such
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15 As the Pennsylvania Supreme Court recently explained in In re Estate of
Plance, 175 A.3d 249 (Pa. 2017):
Prior to the most recent revision, [Rule 342] “[did] not require
that any particular class of orders be treated as final, but instead
[left] the determination of finality of orders not disposing of all
claims and all parties up to the Orphans’ Court judge.” In re
Estate of Stricker, 602 Pa. 54, 977 A.2d 1115, 1118 (Pa. 2009).
Concurring in Stricker, then-Justice, now Chief Justice, Saylor
questioned the prudence of this rule, as the case-by-case
determination of finality procedure could lead to inconsistent
results in different Orphans’ Courts, and could cause undue delays
in estate administration. Justice Saylor opined that “allowing
appeals as of right most frequently would result in a net benefit.”
Id. at 1121 (Saylor, J., concurring). Following Justice Saylor’s
recommendation in Stricker, Rule 342 was revised to provide for
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orders must be raised in an immediate appeal, and failure to do so constitutes
waiver. The Comment to Rule 342 states:
[I]t is difficult to analogize civil litigation to litigation arising
in estate, trust and guardianship administration. The civil
proceeding defines the scope of the dispute, but the
administration of a trust or estate does not define the scope of the
litigation in Orphans’ Court. Administration of a trust or an estate
continues over a period of time. Litigation in Orphans’ Court may
arise at some point during the administration, and when it does
arise, the dispute needs to be determined promptly and with
finality so that the guardianship or the estate or
trust administration can then continue properly and orderly. Thus,
the traditional notions of finality that are applicable in the context
of ongoing civil adversarial proceedings do not correspond to
litigation in Orphans’ Court.
In order to facilitate orderly administration of estates, trusts
and guardianships, the 2011 amendments list certain orders that
will be immediately appealable without any requirement that the
Orphans' Court make a determination of finality. Orders falling
within subdivisions (a)(1)-(7) no longer require the lower court to
make a determination of finality.
Subdivisions (a)(1)-(7) list orders that are unique to
Orphans’ Court practice, but closely resemble final orders as
defined in Rule 341(b).
Pa.R.A.P. 342, Comment.
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appeals as of right for specified categories of Orphans’ Court
orders. See Pa.R.A.P. 342(a). The rule explicitly states that
objections to such orders must be raised in an immediate, timely
appeal, on pain of waiver. See Pa.R.A.P. 342(c).
Id. at 269.
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Here, the private sale occurred on February 15, 2013, having been
authorized by the orphans’ court’s March 22, 2011 order. On March 7, 2013,
the Executor filed a Report and Return of Private Sale (Report), seeking court
approval of the private sale. The Report attached fiduciary deeds for the
properties as Exhibits “1”, “2” and “3”. The Executor’s fiduciary deed for
Homestead Place contained NO provision regarding the Dunzik’s ownership of
the house and barn, underlying land, and appurtenances. The April 30, 2013
order finalized the sale of the real estate by the Executor and approved the
fiduciary deeds attached to the Report as Exhibits 1, 2, and 3.
Significantly, the orphans’ court’s April 30, 2013, order explicitly directs
that “the Report of Edward P. Krasinski, Executor of the estate of the above
Decedent, is hereby approved in all regards and the properties described in
Exhibits 1, 2 and 3 of said Report shall be conveyed to the grantees in
accordance with the terms set out in the Report.” Order, 4/30/2013. As
such, the order clearly “determines an interest in real … property.” Pa.R.A.P.
342(a)(6). Consequently, the orphans’ court’s April 30, 2013, order was
appealable as of right pursuant to Rule 342. Although Patricia filed pro se
objections, as the orphans’ court noted, she “did not raise the appropriate
issues in her pro se objections,” and the private sale was confirmed. Orphans’
Court Opinion, 4/22/2015, at 10.
Furthermore, Patricia had challenged ownership of the properties in a
civil action that caused the court to issue a stay on the Executor’s sale of the
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properties. The civil suit resulted in the trial court’s December 24, 2012,
determination that there was no oral agreement upon which Patricia could
base her claim of ownership of the properties. This Order was never appealed.
See Footnote 5, supra. Therefore, it is evident that Patricia was aware that
her claims of ownership to the properties would be lost upon sale of the
properties.
When the orphans’ court entered its April 30, 2013, order, approving
the private sale and the fiduciary deeds, Patricia lost her claims of ownership
in Homestead Place and the other properties. Therefore, as the orphans’ court
correctly determined, Patricia’s failure to appeal the April 30, 2013 order
pursuant to Rule 342(a)(6) resulted in waiver. See Pa.R.A.P. 342(c).
Accordingly, Patricia cannot obtain relief on her claims related to the private
sale.
In Patricia’s next two issues, she contends that the Executor mishandled
the tax ramifications of the Estate by (1) reporting to the Internal Revenue
Service that Patricia was the seller of her interest in real estate, rather than
the Estate and, (2) improperly valuing the Decedent’s real estate, resulting in
unrealistic appreciation and capital gains. See Patricia’s Brief at 23-32.
Our standard of review is well settled:
The findings of a judge of the orphans’ court division, sitting
without a jury, must be accorded the same weight and effect as the
verdict of a jury, and will not be reversed by an appellate court in
the absence of an abuse of discretion or a lack of evidentiary
support. This rule is particularly applicable to findings of fact which
are predicated upon the credibility of the witnesses, whom the
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judge has had the opportunity to hear and observe, and upon the
weight given to their testimony. In reviewing the [o]rphans’
[c]ourt’s findings, our task is to ensure that the record is free from
legal error and to determine if the Orphans’ Court’s findings are
supported by competent and adequate evidence and are not
predicated upon capricious disbelief of competent and credible
evidence.
In re Estate of Bechtel, 92 A.3d 833, 837 (Pa. Super. 2014).
We begin with Patricia’s contention that it is the Estate that sold the real
property, and not Patricia individually, and therefore she should not have been
subjected to any tax ramifications of the sale. See Patricia’s Brief at 23-29.
In concluding that this issue was without merit, the orphans’ court opined:
In regard to Objection No. 5 wherein [Patricia] objects to
receiving the 1099-S documents as to her sale of the one-half
interest in the properties thereby incurring a capital gains tax, the
Estate has acted appropriately. 20 Pa.C.S.A. § 301 entitled Title
to Real and Personal Estate of the Decedent indicates, in part, as
follows: (b) Real Estate. - Legal title to all real estate of a decedent
shall pass at his death to his heirs or devisees, subject to all the
powers granted to the personal representative by this Code and
lawfully by the will and to all orders of the court.
Therefore, while the Estate may have appeared to be the
owner and seller of the properties, legal title actually was
immediately vested in Sophia’s four children as of her date of
death. Since [Eleanor] renounced her right to her one-fourth
interest to [Patricia], [Patricia] is deemed to have sold her 50%
interest in the real estate via [Edward], the Executor, who had the
legal power to do so pursuant to Court Order….
Orphans’ Court Opinion, 4/22/2015, at 10-11.
We disagree with the orphans’ court’s analysis. Because the real estate
was not specifically devised, we conclude the taxable gain from the private
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sale should have been borne by the Estate, as the Executor was the seller of
the real estate.
Both the orphans’ court and the Executor fail to recognize the import of
the second half of Section 301(b) of the PEF Code, which provides:
Legal title to all real estate of a decedent shall pass at his death
to his heirs or devisees, subject however, to all powers
granted to the personal representative by this title and
lawfully by the will and to all orders of the court.
20 Pa.C.S. § 301(b) (emphasis added). In this regard, as discussed above,
the Executor had the authority to sell the Decedent’s real estate, which was
not specifically devised, pursuant to Sections 3311(a) and 3351 of the PEF
Code. As already stated, Section 3351 provides:
Except as otherwise provided by the will, if any, the
personal representative may sell, at public or private sale,
any personal property whether specifically bequeathed or not, and
any real property not specifically devised, and with the
joinder of the specific devisee real property specifically devised. …
20 Pa.C.S. § 3351 (emphasis added).
Furthermore, Section 3357(a) provides, in relevant part:
If the personal representative has given such bond, if any, as shall
be required in accordance with this title, any sale, mortgage, or
exchange by him, whether pursuant to a decree or to the exercise
of a testamentary power or of a power under this title, shall pass
the full title of the decedent therein, unless otherwise
specified, discharged from the lien of legacies, from liability for
all debts and obligations of the decedent, from all liabilities
incident to the administration of the decedent’s estate, and from
all claims of distributees and of persons claiming in their right, …
20 Pa.C.S. § 3357 (emphasis added).
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In Quality Lumber & Millwork Co. v. Andrus, 200 A.2d 754 (Pa.
1964), the Pennsylvania Supreme Court construed several sections of the
Fiduciaries Act, now sections 301(b), 3351 and 3357 of the PEF Code. The
question was whether Mrs. Andrus, the sole heir and personal representative
of the decedent, acquired title in her individual capacity to real estate owned
by the decedent upon the death of the decedent, or not until a later
distribution of real estate from the estate. Our Supreme Court held that title
may pass to heirs upon death, but during the administration of the estate the
title was “expressly subjected to those powers statutorily granted to her in
her capacity of personal representative.” Id. at 756 (emphasis in original).
The Quality Lumber Court concluded: “Until a distribution had been made,
the only proper source of full title of the decedent was the administratrix.” Id.
at 759. Accord Tigue v. Basalyga, 304 A.2d 119 (Pa. 1973) (personal
representative was an indispensable party in plaintiff’s action against heirs to
set aside a deed allegedly obtained by fraudulent acts committed by deceased-
grantee).
Furthermore, because Patricia is a residuary beneficiary and the real
estate was sold to liquidate the assets for distribution, Item III of the Will is
controlling: “[A]ll taxes that may be assessed in consequence of my death,
of whatever nature, and whatever jurisdiction imposed, shall be paid from my
residuary estate as a part of the expense of the administration of my estate.”
Last Will and Testament, 8/18/1999, at Item III.
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Finally, and significantly, the Executor conveyed the properties by
separate fiduciary deeds, wherein he identified himself as the Grantor.
Accordingly, based upon the above-cited provisions of the PEF Code, the
holding in Quality Lumber, Item III of the Decedent’s Will, and the fiduciary
deeds, we conclude the Executor was the seller of the Decedent’s real estate,
and not Patricia, who was not specifically devised the real estate. As such, the
Estate was responsible for the taxable gain from the private sale, and Patricia
is entitled to relief on this basis.
Next, Patricia argues that the Executor did not properly value the
properties on the date of death of the Decedent, which resulted in unrealistic
appreciation and capital gains. Here, the Executor used the real estate tax
assessment value and a factor called the common level ratio to establish
minimal values of the real estate interests on the date of the Decedent’s death.
Patricia points out “the Executor sold four (4) tracts of land, in fee, for a total
consideration of $405,000.00, and experienced a ‘gain’ in value of
$321,620.79 (nearly 500%) over the $83,379.00 reported.” Patricia’s Brief
at 31. Patricia maintains there should have been no gain at all.
Patricia argues the Internal Revenue Code provides for a “step-up” in
basis pursuant to IRC § 1014(a) when valuing lands and property received
from a decedent’s estate. Id. She states the basis of land acquired from a
decedent is equal to the date of death value of the land. Id. She concludes,
“Had the Estate properly placed the value of the lands at or equal to the
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‘appraised’ value (and assuming that the sales prices still equaled that value)
the [E]state and the beneficiaries would have experienced no gain, and
consequently no income tax when the [E]state sold the lands.” Id. at 31-
32.16
We find no reason to conclude Patricia is entitled to relief on this claim.
The Executor’s Pennsylvania inheritance tax return, which used the real estate
tax assessment value and the common level ratio to establish the date of
death values, was “accepted as filed” by the Pennsylvania Department of
Revenue. See Commonwealth of Pennsylvania Department of Revenue Notice
of Inheritance Tax Appraisement, Allowance or Disallowance of Deductions
and Assessment of Tax, 6/22/2009. Therefore, Patricia’s argument that the
Executor’s method of determining the value of the real estate on the date of
death was “grossly flawed”17 is unavailing.
Finally, while Patricia also argues that the properties were overvalued
or undervalued in the appraisals, any issue as to valuation relates to the
____________________________________________
16 The bids for each property were the same as the 2010 appraisal values.
See Orphans’ Court Opinion, 4/22/2015, at 7. While Patricia is correct that
the basis is stepped up to the date of death, she offers no evidence as to the
“proper” value on November 4, 2006, the Decedent’s date of death. It is
highly unlikely that the Internal Revenue Service would accept an appraised
value, as of January 30, 2010, as the date of death value for calculating capital
gains.
17 Patricia’s Brief at 31.
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private sale that was approved by the April 30, 2013 order. Because we have
determined, supra, that order was an appealable order, Patricia has waived
this aspect of her claim.
In sum, we reverse Paragraph 3 of the orphans’ court’s July 16, 2015
order, to the extent that it dismissed Patricia’s exceptions that sought relief
on her claim that the Estate, and not Patricia, was responsible for the taxable
gain from the private sale. The remaining claims have been waived or warrant
no relief.
III. The Estate’s Objections
We now turn to the issues raised by the Estate and provide the following
background. Contained within Patricia’s sixth objection to the first and final
account was the following:
41. [Edward] has received and improperly withheld from
[Patricia] revenues related to gas exploration and leasing in the
approximate amount of $40,000.00 related to the oil and gas
contained within and underlying [Homestead Place].
42. [Patricia] is the owner of the oil & gas interest
underlying [Homestead Place], by virtue of a deed from Edith
Nearhood, dated July 9, 2002, and recorded as Instrument No.
200211242.
Objections to First and Final Account, 7/3/2014, at ¶¶ 41-42.
In sustaining this objection, ruling in favor of Patricia, and ordering the
Executor to pay Patricia $39,536, the orphans’ court stated:
[The aforementioned objection] claims that [Edward]
improperly withheld gas monies in the amount of $40,000.00
relating to [Homestead Place]. It states therein that [Patricia] is
the actual owner of oil and gas interests underlying [Homestead
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Place] by virtue of a deed recorded in Clearfield County as
Instrument No. 200211242. This deed was not offered as an
exhibit at [the] time of [the] non-jury trial. Following the non-
jury trial and receipt of briefs, while preparing the court’s opinion,
the undersigned went to the recorder of deeds office and obtained
a copy of [the deed which Patricia references]. The court hereby
takes judicial notice of the deed, and the court has caused it to be
filed with the record for potential appellate review. This 2002
deed is from Edith Nearhood as grantor, to [Patricia] as grantee.
The deed describes a parcel of 96 acres and one hundred and eight
perches in Cooper Township, Clearfield County, with Tax Map
number 110-R7-9, and purports to convey coal, gas and oil, and
other subsurface rights to [Patricia]. [Homestead Place] in the
case at bar is identified with tax map number 110-R7-9.
***
This court can find no testimony from the non-jury trial
where this issue, being [Patricia’s] claim that she is the full and
complete owner of the oil and gas interests under this tract, was
discussed. In fact, no evidence was submitted by either party.
***
A close examination of the first and final account shows on
page 9 under “Other Income” the gas lease payments. By far,
most of the payments are from [Homestead Place]. (A total of
$39,536.00). On page 3 under “Receipts of Principal” the Estate
lists its assets; [Homestead Place] is number 4 under the “Real
Estate” heading. It is described as “House, buildings, and 98.84
acres (less 96 A of coal, minerals, gas & oil)….” (Emphasis
added). The same exclusion of sub-surface rights [appears in
other exhibits]. The court, in trying to analyze this mishmash,
wondered if perhaps the sale of [Homestead Place] was not to
include the oil and gas rights such that the same could be retained
in the Estate for the future benefit of all heirs. However, a review
of the documents describing the terms of the private sale provides
no reference whatsoever to any oil, gas or other sub-surface rights
as to [Homestead Place].
[] Exhibit 27 is a copy of the memorandum of lease dated
September 15, 2009 wherein [Edward, as executor of the Estate,]
confirms the Estate has entered into a gas lease (or consultant
agreement) with Long Consulting Group. This is clearly referring
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to [Homestead Place,] as the property subject to the lease is
described as Tax Parcel No. 110-R07-9, 98.84 acres and in Cooper
Township. The court wonders how the executor can enter into a
gas lease on a property which the first and final account (and the
inheritance tax return) clearly indicates that the oil and gas rights
are excluded. (at least 96 acres thereof).
Based upon a substantial lack of information and a severely
inadequate record, the court must decide if the Estate properly
accounted for the gas royalties from [Homestead Place]. The
court boils it down to the following. [Patricia] has a deed
purporting to convey to her all sub-surface rights beneath the
Homestead surface. The Estate in its Inheritance Tax return and
first and final account clearly indicates it does not own 96 acres of
oil, gas and other sub-surface rights below the Homestead [Place]
surface. The court finds [Patricia] has met her burden of proof
and finds the Estate erred by including Homestead [Place] gas
royalties in the amount of $39,536.00 as an Estate asset. These
monies will be paid to [Patricia] and removed from the Estate
assets.
Orphans’ Court Opinion, 4/22/2015, at 17-19 (unnecessary capitalization and
some citations omitted omitted).
Based on the foregoing, the orphans’ court sustained Patricia’s Objection
No. 6, paragraphs 41 and 42, and required the Executor to pay Patricia
$39,536. The Executor filed exceptions, arguing that Patricia was not the
owner of the sub-surface estate at issue, and the orphans’ court erred by
granting Patricia compensation on this basis. The Executor also contended
that Edith Nearhood never owned the sub-surface estate and that any deed
she granted could not have conveyed what she did not own.
On July 16, 2015, the orphans’ court dismissed the Executor’s
exceptions, concluding that the Estate “has attempted to introduce facts and
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documents not of record in the present matter” in support of its dismissal.
Order, 7/16/2015, at ¶1. This issue is the basis of the Estate’s appeal.
The Executor first contends that the orphans’ court erred by purporting
to take judicial notice of the Nearhood deed, then giving it conclusive effect,
and thereby sustaining Patricia’s objections related to the oil and gas
payments. Estate’s Brief at 12-16.
Pa.R.E. 201(b) governs judicial notice of adjudicative facts.
The rule states: “A judicially noticed fact must be one not subject
to reasonable dispute in that it is either (1) generally known within
the territorial jurisdiction of the trial court or (2) capable of
accurate and ready determination by resort to sources whose
accuracy cannot reasonably be questioned.” Pa.R.E. 201(b). A
court may take judicial notice of an indisputable adjudicative fact.
A fact is indisputable if it is so well established as to be a matter
of common knowledge. Judicial notice is intended to avoid the
formal introduction of evidence in limited circumstances where the
fact sought to be proved is so well known that evidence in support
thereof is unnecessary.
Kinley v. Bierly, 876 A.2d 419, 421 (Pa. Super. 2005) (some citations and
quotation marks omitted).
Here, the orphans’ court took judicial notice of a deed filed in the
recorder of deeds office. This, in and of itself, was not error because it is well
settled that “the court has the right to take judicial notice of public
documents.” Bykowski v. Chesed, Co., 625 A.2d 1256, 1258 n.1 (Pa. Super.
1993). However, the rule provides that “[o]n timely request, a party is
entitled to be heard on the propriety of taking judicial notice and the nature
of the fact to be noticed. If the court takes judicial notice before notifying a
party, the party, on request, is still entitled to be heard.” Pa.R.E. 201(e).
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Instantly, the Executor became aware of the orphans’ court’s decision
to take judicial notice when it filed its opinion on April 22, 2015. The Executor
timely filed exceptions contesting the implications of the deed on May 12,
2015. However, the orphans’ court dismissed these exceptions on the basis
that “the record has previously closed.” Order, 7/16/2015. Thus, it is clear
that the Executor did not have the opportunity to be heard. Where, as here,
a party has made a timely request to be heard after learning of the judicial
notice, the orphans’ court was obliged to entertain it. Pa.R.E. 201(e).
In this case, the need was even more apparent where the orphans’ court
took judicial notice without any request by Patricia or notice to any party. The
orphans’ court then went on to offer a series of factual conclusions on this
basis. The Nearhood deed may or may not be a valid deed to the property.
However, the orphans’ court should leave it to Patricia and the Executor to
litigate that issue. Accordingly, we vacate Paragraph 1 of the orphans’ court’s
July 16, 2015 order, dismissing the Estate’s exceptions, and we remand to the
orphans’ court to conduct a hearing on this objection. At that hearing, the
burden is on Patricia, as the party objecting to the first and final account, to
present evidence of her right to those oil and gas payments.
In conclusion, based upon the above discussion concerning the appeals
of Patricia and the Estate, we affirm the orphans’ court’s July 16, 2015, order
in part, reverse in part, vacate in part, and remand for proceedings consistent
with this Opinion.
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Order affirmed in part, reversed in part, vacated in part, and remanded
for further proceedings consistent with this Opinion. Rule to Show Cause
discharged. Jurisdiction relinquished.
President Judge Gantman, President Judge Emeritus Bender, Judge
Bowes, Judge Lazarus, Judge Olson, Judge Stabile and Judge Dubow join the
majority opinion.
Judge Shogan files a concurring and dissenting opinion.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 5/15/2018
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