Rellick-Smith, S. v. Rellick, B. ( 2023 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
SHARLEEN M. RELLICK-SMITH : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
BETTY J. RELLICK AND KIMBERLY V. : No. 630 WDA 2022
VASIL :
Appeal from the Order Entered April 22, 2022
In the Court of Common Pleas of Indiana County Orphans’ Court at
No(s): 31-14-0490
BEFORE: BOWES, J., MURRAY, J., and PELLEGRINI, J.*
MEMORANDUM BY BOWES, J.: FILED: May 17, 2023
Sharleen M. Rellick-Smith appeals from the order that dismissed for lack
of standing her claims of breach of fiduciary duty brought against Betty J.
Rellick and Kimberly V. Vasil (collectively “Defendants”), challenging actions
they undertook as attorneys-in-fact for Rose Rellick (“Decedent”). We reverse
and remand for further proceedings.
We begin with a summary of this case’s protracted history. Rellick is
the sister of Decedent, while Vasil and Rellick-Smith are the daughters of
another of Decedent’s siblings. In March 2006, Decedent granted power of
attorney (“POA”) to Rellick and Vasil. In August 2006, Decedent created two
certificate-of-deposit accounts (“CDs”) at First Commonwealth Bank. Each CD
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* Retired Senior Judge assigned to the Superior Court.
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had an initial value of approximately $150,000 and was issued to Decedent
“or” Rellick “or” Vasil “or” Rellick-Smith. In 2009, Rellick and Vasil used the
POA to remove Rellick-Smith’s name from the CDs. Decedent died at the end
of 2012, and Rellick and Vasil thereafter withdrew the money from the CDs,
then totaling more than $350,000.
In October 2014, Rellick-Smith filed a complaint against Rellick and Vasil
asserting that Defendants abused their POA and thwarted Decedent’s intent
that Rellick-Smith receive one-third of the value of the CDs upon her death.
Defendants promptly filed an answer to the complaint raising no affirmative
defenses. In February 2015, Defendants moved to dismiss the action
alternatively because Rellick-Smith lacked standing to challenge Defendants’
performance as Decedent’s POA or that the statute of limitations barred the
claims. The orphans’ court concluded that Defendants had waived the statute
of limitations defense by not including it in their responsive pleading, but
agreed that Rellick-Smith lacked standing, and therefore dismissed the action.
On appeal, this Court treated Defendants’ motion as preliminary
objections. Accordingly, we deemed the factual allegations of Rellick-Smith’s
complaint to be true and applied the standard of review for preliminary
objections, which requires us to affirm only if it was clear and free from doubt
that Rellick-Smith would be unable to establish a right to relief. See Rellick-
Smith v. Rellick (“Rellick-Smith I”), 147 A.3d 897, 901 (Pa.Super. 2016).
Referencing the allegations of Rellick-Smith’s complaint and the exhibits
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thereto, this Court indicated that “the funds in the CDs were held ‘in trust for’
Rellick-Smith.” Id. at n.5. This Court concluded that Rellick-Smith, as a trust
account beneficiary, had standing to challenge her removal from the CDs. In
particular, the Rellick-Smith I Court was persuaded that the beneficiary of a
Totten trust account has “a sufficient interest during the life of the depositor
to entitle him to recover the money after the death of the depositor where the
trust was not revoked by the depositor” and a third party wrongfully removed
money from the account “before the death of the depositor and without his
consent.” Id. at 903 (quoting Scott, TRUSTS (4th Ed. 1987) § 58.4, p. 224).
The Court therefore held as follows:
[W]e conclude that Rellick-Smith, as a beneficiary of the CDs
named by the decedent/principal during her life, had standing to
challenge the propriety of the Defendants’ unilateral action, as
agents under the POA agreement, in changing the decedent’s
beneficiary designation, to the Defendants’ benefit. To not afford
named beneficiaries of a Totten trust standing to sue in
circumstances such as those presented in the instant case could
lead to an absurd and unjust result. Moreover, Rellick-Smith has
met the [generally applicable requirements for standing]; she is
certainly an aggrieved party as she has a substantial, direct and
immediate interest in the outcome of this litigation.
Id. at 904 (cleaned up). This Court did not consider the alternative argument
that the statute of limitations barred Rellick-Smith’s claim, noting that neither
party addressed that issue on appeal. Id. at 901 n.12.
On remand, the case was reassigned to a different judge of the orphans’
court. Defendants, through new counsel, filed a motion to amend their
answer, seeking, inter alia, to raise the statute of limitations as an affirmative
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defense. The orphans’ court granted the motion, and the case proceeded to
trial. In that proceeding, Rellick-Smith presented, inter alia, the testimony of
Decedent’s tax preparer, Ann Marcoaldi, who indicated that she advised
Decedent to combine various accounts into the CDs as a testamentary device
that Decedent would own during her lifetime and Rellick, Vasil, and Rellick-
Smith would share equally upon Decedent’s death, minimizing the inheritance
tax. Id. at 20, 30, 40-41. Ms. Marcoaldi further indicated that she and Rellick-
Smith learned in 2009 that Rellick had exercised the POA to remove Rellick-
Smith from the CDs and undertook an investigation to learn why. Id. at 56-
57, 77. Rellick-Smith testified that she brought this action to enforce
Decedent’s right to have her testamentary wishes honored by her POA agents.
Id. at 149-50.
Defendants, for their part, sought to establish that Rellick-Smith lacked
standing pursuant to the Rellick-Smith I exception to the general rule that
only a personal representative may pursue the claims of a decedent. In that
vein, they presented testimony from several witnesses to establish that the
CDs were not Totten trust accounts, but rather joint accounts. Id. at 201-07,
220-25. Defendants also defended the substantive claim that they had
breached their fiduciary duties to Decedent by introducing evidence that
Rellick-Smith had been in dire financial straits before Decedent’s death, that
she had in 2009 cashed out a different CD on which her name appeared along
with Decedent’s name, and that in 2012 she had attempted to secure a
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$135,000 mortgage on Decedent’s interest in real property. Id. at 129-30,
161-74. Defendants took the position that removing Rellick-Smith’s name
from the CDs at issue was, under these circumstances, a proper exercise of
their duty to protect Decedent’s assets. Id. at 250-54.
Ultimately, the orphans’ court credited Ms. Marcoaldi’s testimony that
Rellick-Smith learned in September 2009 that Defendants had removed her
name from the CDs, and thus ruled that her 2014 claim for breach of fiduciary
duty was barred by the two-year statute of limitations codified at 42 Pa.C.S.
§ 5524(7). This Court affirmed, holding that permitting Defendants to plead
the statute of limitations as a defense after the prior judge had deemed it
waived did not violate the law of the case doctrine, and that the finding that
the claim was barred was supported by the record. See Rellick-Smith v.
Rellick (“Rellick-Smith II”), 229 A.3d 390 (Pa.Super. 2020) (non-
precedential decision at 6-10). However, our Supreme Court reversed this
Court, concluding instead that the inconsistent rulings about Defendant’s
ability to belatedly raise a statute-of-limitations defense violated the
coordinate jurisdiction component of the law-of-the-case doctrine. See
Rellick-Smith v. Rellick (“Rellick-Smith III”), 261 A.3d 506, 518-19 (Pa.
2021) (Opinion Announcing the Judgment of the Court). Accordingly, our High
Court remanded the matter to the orphans’ court for further proceedings.
Following a post-remand status conference, the orphans’ court
requested and received supplemental post-trial briefs from the parties. Based
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upon its review of the evidence offered at the 2018 trial, the orphans’ court
concluded that the CDs were joint accounts, not trust accounts, pursuant to
20 Pa.C.S. § 6303 (discussed fully infra). Therefore, the orphans’ court
concluded that Rellick-Smith lacked “standing to challenge the actions of Betty
Rellick and/or Kimberly Vasil acting in the capacity of [Decedent’s] agent
pursuant to the [POA] executed by [Decedent.]” Orphans’ Court Opinion,
4/22/22, at 22. Accordingly, the orphans’ court dismissed Rellick-Smith’s
claim.
Rellick-Smith filed a timely notice of appeal, and both she and the
orphans’ court complied with Pa.R.A.P. 1925.1 Rellick-Smith presents the
following questions for our examination:
I. Whether the [orphans’] court erred by determining that the
Appellant did not have standing.
II. Whether the [orphans’] court erred by failing to reach a
decision on the merits of the action, and thus failed to grant
Appellant appropriate relief.
Rellick-Smith’s brief at 7 (cleaned up).
We begin with a review of the applicable legal principles. First, we note
our standard of review:
When an appellant challenges a decree entered by the orphans’
court, our standard of review requires that we be deferential to
the findings of the orphans’ court.
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1 The orphans’ court adopted its April 22, 2022 opinion as its Rule 1925(a)
opinion. See Order, 6/16/22.
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We 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. Where the rules of law on which
the court relied are palpably wrong or clearly inapplicable, we will
reverse the court’s decree.
In re Estate of Schwartz, 275 A.3d 1032, 1033–34 (Pa.Super. 2022)
(cleaned up).
The trial court disposed of Rellick-Smith’s claim by ruling that she lacked
standing to pursue a claim that Defendants breached their fiduciary duties
owed to Decedent. “Threshold issues of standing are questions of law; thus,
our standard of review is de novo and our scope of review is plenary.” Rellick-
Smith I, supra at 901 (cleaned up).
We have summarized the generally-applicable rules of standing as
follows:
In Pennsylvania, the doctrine of standing is a prudential,
judicially-created principle designed to winnow out litigants who
have no direct interest in a judicial matter. For standing to exist,
the underlying controversy must be real and concrete, such that
the party initiating the legal action has, in fact, been “aggrieved.”
The core concept of standing is that a person who is not adversely
affected in any way by the matter he seeks to challenge is not
“aggrieved” thereby and has no standing to obtain a judicial
resolution to his challenge. A party is aggrieved for purposes of
establishing standing when the party has a substantial, direct and
immediate interest in the outcome of litigation. A party’s interest
is substantial when it surpasses the interest of all citizens in
procuring obedience to the law; it is direct when the asserted
violation shares a causal connection with the alleged harm; finally,
a party’s interest is immediate when the causal connection with
the alleged harm is neither remote nor speculative.
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In re Nadzam, 203 A.3d 215, 220-21 (Pa.Super. 2019) (cleaned up).
We thus begin by examining the nature of the underlying controversy
and Rellick-Smith’s connection to it. Although the pleadings were not a model
of clarity, Rellick-Smith sought to litigate Decedent’s claim that Defendants
breached their fiduciary duties to Decedent. By statute, any action or
proceeding to enforce a right of a decedent “may be brought by or against his
personal representative alone or with other parties as though the decedent
were alive.” 20 Pa.C.S. § 3373. Our Supreme Court has long held that “only
the personal representative of a deceased party in interest stands in the shoes
of such decedent.” In re Kilpatrick’s Estate, 84 A.2d 339, 341 (Pa. 1951)
(cleaned up, emphasis added). “Legatees, spouses or next of kin of that
decedent really have no such interest[.]” Id.It was on that basis that the orphans’ court initially ruled that Rellick-
Smith lacked standing to proceed in this action. See Orphans’ Court Opinion,
6/22/15, at 4-5. However, this Court in Rellick I vacated that ruling and
decided, as a matter of first impression, that a beneficiary of a tentative, or
“Totten,” trust account has standing to sue Defendants directly for a breach
of duty owed to Decedent that caused injury to her tentative interest in the
account. See Rellick-Smith I, supra at 903-04.
The orphans’ court ultimately held that the CDs were not Totten trusts,
but instead joint accounts as created and titled, as viewed by First
Commonwealth Bank, and as defined by the Multiple-Party Account Act
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(“MPAA”). See Orphans’ Court Opinion, 4/22/22, at 17. It discerned no
evidence that Decedent had instead meant to fund the CDs in trust for Rellick,
Vasil, and Rellick-Smith such that she intended to create Totten trust
accounts. Id. Since the beneficiary standing recognized in Rellick-Smith I
therefore did not pertain, the orphans’ court concluded that Rellick-Smith
lacked standing to challenge the actions of Decedent’s POAs because the
principal’s right to enforce that fiduciary obligation passed exclusively to her
personal representative. Id. at 21-22.
Rellick-Smith maintains that, regardless of the form of account, “all
individuals named on the accounts or involved in their creation knew the clear
intention of [Decedent] for the purpose of the account” was for the funds to
be to shared equally among the three beneficiaries upon Decedent’s death.
See Rellick-Smith’s brief at 17. Rellick-Smith insists that, since she presented
clear and convincing evidence that Decedent’s intent was “to have the money
put in the CDs to be divided evenly between the parties” upon her death,
Rellick-Smith “meets the standing burden established by the courts.” Id. at
21, 23.
Rellick and Vasil argue that, although she does not explicitly state it,
Rellick-Smith’s position is “that despite the CDs being titled as joint accounts,
there was clear and convincing evidence that [Decedent] intended the CDs to
be Totten trust[s], and pursuant to 20 Pa.C.S. § 6303(a) the [orphans’] court
should have found the CDs to be Totten trusts.” Defendants’ brief at 7
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(cleaned up). Defendants assert that Rellick-Smith’s arguments as to
Decedent’s intent are based upon viewing the evidence in a light most
favorable to her position, while this Court must instead consider whether the
certified record contains sufficient evidence to support the factual findings of
the orphans’ court. Id. at 8-11. Defendants maintain that Rellick-Smith failed
to meet her burden of proving that Decedent “intended the joint accounts to
be anything other than joint accounts,” and, consequently, she lacked
standing based upon In re Kilpatrick’s Estate and its progeny. Id. at 11,
15-17.
Although she does not present the most straightforward argument,
Rellick-Smith’s position appears to be that, in deciding the issue of standing,
the orphans’ court and Defendants attach unwarranted importance on the type
of multi-party accounts Decedent created. Instead, Rellick-Smith asserts that
the issue is whether the Decedent’s intent to utilize the CDs as testamentary
devices to pass assets to Rellick-Smith imbued Rellick-Smith with a
substantial, direct, and immediate interest in the outcome of litigation such
that she is an aggrieved party with standing to sue.
The MPAA was “designed to reduce certain questions concerning many
forms of joint accounts and the so-called Totten trust account.” 20 Pa.C.S.
§ 6301 Comment. Pursuant to the MPAA, with exceptions not relevant here,
any account with multiple parties is “either a joint account or a trust account.”
20 Pa.C.S. § 6301. Those two types of accounts are defined as follows:
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“Joint account” means an account payable on request to one or
more of two or more parties whether or not mention is made of
any right of survivorship.
....
“Trust account” means an account in the name of one or more
parties as trustee for one or more beneficiaries where the
relationship is established by the form of the account and the
deposit agreement with the financial institution and there is no
subject of the trust other than the sum on deposit in the account;
it is not essential that payment to the beneficiary be mentioned in
the deposit agreement. A trust account does not include a regular
trust account under a testamentary trust or a trust agreement
which has significance apart from the account, or a fiduciary
account arising from a fiduciary relation such as attorney-client.
Id. The ownership of multi-party accounts while all implicated individuals are
alive is governed by § 6303, which provides as follows:
(a) Joint account.--A joint account belongs, during the lifetime
of all parties, to the parties in proportion to the net contributions
by each to the sum on deposit, unless there is clear and convincing
evidence of a different intent.
(b) Trust account.--Unless a contrary intent is manifested by
the terms of the account or the deposit agreement or there is
other clear and convincing evidence of an irrevocable trust, a trust
account belongs beneficially to the trustee during his lifetime, and
if two or more parties are named as trustees of the account during
their lifetimes beneficial rights as between them are governed by
subsection (a). If there is an irrevocable trust, the account
belongs beneficially to the beneficiary.
20 Pa.C.S. § 6303. Concerning the right of survivorship, the MPAA states:
(a) Joint account.--Any sum remaining on deposit at the death
of a party to a joint account belongs to the surviving party or
parties as against the estate of the decedent unless there is clear
and convincing evidence of a different intent at the time the
account is created. If there are two or more surviving parties,
their respective ownerships during lifetime shall be in proportion
to their previous ownership interests under section 6303 (relating
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to ownership during lifetime) augmented by an equal per capita
share for each survivor of any interest the decedent may have
owned in the account immediately before his death; and the right
of survivorship continues between the surviving parties.
(b) Trust account.--At the death of the trustee or the survivor
of two or more trustees, any sum remaining on deposit belongs to
the person or persons named as beneficiaries, if surviving, or to
the survivor or survivors of them if one or more die before the
trustee or last surviving trustee, unless there is clear and
convincing evidence of a contrary intent; if two or more
beneficiaries survive, there is no right of survivorship in event of
death of any beneficiary thereafter unless the terms of the account
or deposit agreement expressly provide for survivorship between
them.
20 Pa.C.S. § 6304.
In the instant case, it is uncontroverted that Decedent created and
funded the CDs as testamentary devices. Since she sought to minimize the
inheritance taxes, Decedent opted to use joint “or” accounts, instead of trust
accounts. See N.T. Trial, 12/3-4/18, at 40-41, 224-25. Plainly, the CDs,
payable to Decedent or Rellick or Vasil or Rellick-Smith, were facially joint
accounts as defined by the MPAA. See 20 Pa.C.S. § 6301. In that respect,
the Rellick-Smith I Court’s acceptance, for purposes of deciding preliminary
objections, that the CDs were trust accounts was ultimately incorrect.
However, the distinctions between joint accounts and trust accounts do
not warrant a different standing analysis. As indicated above, the Rellick-
Smith I Court was persuaded by the following reasoning:
Where a third person wrongfully withdraws money from the
account before the death of the depositor and without his consent,
the beneficiary can, after the death of the depositor maintain a
suit against him for the money so withdrawn. The beneficiary had
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a sufficient interest during the life of the depositor to entitle him
to recover the money after the death of the depositor where the
trust was not revoked by the depositor.
Rellick-Smith I, supra at 903 (quoting Scott, TRUSTS (4th Ed. 1987) § 58.4,
p. 224).
This Court offered the following description of a trust account:
One who deposits money in a savings account in her own name in
trust for another establishes a Totten trust. The name is derived
from In re Totten, the New York Court of Appeals decision widely
credited with first conceiving the notion of a tentative trust. A
Totten trust allows the depositor to retain complete control of the
fund during his life and yet secure to the beneficiary any balance
standing in the account at the death of the depositor. Totten
trusts are essentially a poor man’s will, a judicial creation that,
strictly speaking, is neither a will nor a trust but are fairly
obviously testamentary transfers.
Rellick-Smith I, supra at 899 n.5 (cleaned up, emphasis added). Our
Supreme Court also described a joint account as “a poor man’s will.”
Deutsch, Larrimore & Farnish, P.C. v. Johnson, 848 A.2d 137, 142 (Pa.
2004). In Deutsch, the High Court explained:
One who knowledgeably creates a joint account with another
arguably does so with the present intent to employ the account’s
survivorship characteristic in substitution for a testamentary
device. Furthermore, accounts with right of survivorship
provisions are often set up to allow caretakers to assist senior
citizens with the management of their finances. Their well-
planned financial protection can best be honored by adhering to
the statutory presumption created by [§] 6303. Like other
testamentary devices, creation of a joint account, without more,
accomplishes no present transfer of title to property. If, as in this
case, one person deposits all sums in the joint account, this
arrangement contemplates transfer of title to those funds to the
other person or persons named on the account upon the death of
the depositor. Moreover, the creator of a joint account, like the
maker of a will and unlike the giver of a gift, may change his or
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her mind prior to death. These considerations suggest that joint
accounts share more in the character of testamentary devices
than they do in the character of present transfers of property, or
gifts.
Id. at 143-44 (cleaned up).
Hence, the two types of MPAA accounts are both testamentary in nature,
with the depositor retaining ownership of the account funds during her lifetime
while identifying beneficiaries who will take ownership of the assets upon the
depositor’s death outside the probate process. The difference between the
two is whether the depositor wishes to be the only person with access to the
account during her lifetime, or whether the death beneficiaries will also have
access to the funds while they are still owned by the depositor. We fail to see
how this difference gives the tentative beneficiary of a joint account any less
of “a substantial, direct and immediate interest” in litigating the depositor’s
claim for breach of fiduciary duty against her POA agents than the tentative
beneficiary of a trust account. Rellick-Smith I, supra at 904. Both types of
beneficiaries have the same “sufficient interest during the life of the depositor
to entitle him to recover the money after the death of the depositor where the
[account] was not revoked by the depositor.” Id. at 903 (quoting Scott,
TRUSTS (4th Ed. 1987) § 58.4, p. 224).
We therefore conclude that Rellick-Smith I’s ultimate holding still
controls despite the well-founded conclusion of the orphans’ court that the
CDs were joint accounts rather than trust accounts. Specifically, we re-phrase
that holding as follows: Rellick-Smith, by virtue of having been granted a right
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of survivorship in the CDs by Decedent during Decedent’s life, had standing
to challenge the propriety of the Defendants’ unilateral action, as agents under
the POA, in terminating Rellick-Smith’s survivorship interest to benefit
themselves rather than Decedent. Compare with Rellick-Smith I, supra
at 904 (“Rellick-Smith, as a beneficiary of the CDs named by the
decedent/principal during her life, had standing to challenge the propriety of
the Defendants’ unilateral action, as agents under the POA agreement, in
changing the decedent’s beneficiary designation, to the Defendants’ benefit.”).
Accordingly, we are constrained to remand this case to the orphans’
court yet again for further proceedings. Specifically, the orphans’ court must
decide the merits of Rellick-Smith’s claim that Defendants violated their
fiduciary duties to Decedent by removing Rellick-Smith as a party to the CD
accounts. We leave it to the sound discretion of the orphans’ court whether
it needs to receive additional evidence or briefing on the matter or whether it
can make a determination based upon the record already created.
Order reversed. Case remanded for further proceedings. Jurisdiction
relinquished.
Judge Pellegrini joins this Memorandum.
Judge Murray concurs in the result.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 5/17/2023
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