Appeal of Partnership Buy-Sell Agreement

Posted on by August 24, 2023

The PA Supreme Court has allowed an appeal on the following issue (as stated by the petitioner):

“Where a non-party to a partnership agreement is not a signatory to the agreement and is not a third-party beneficiary of it and where a partnership agreement does not permit assignment, whether the Court’s review is necessary to clarify the circumstances where a non-party could be permitted to ‘step into the shoes’ of a party to an agreement and to enforce contractual rights as if that individual were a party to the agreement.”

In re: Estate of Peter J. Caruso, III, 43 WAL 2023 (8/21/2023).

The Superior Court had allowed specific performance of a buy-sell provision in a partnership agreement even though 12 years had elapsed from the death of one of the two partners, because the conduct of the surviving partner and the deceased partner’s widow showed that they intended to continue to operate the partnership under the partnership agreement. In re: Estate of Peter J. Caruso, III, 1406 WDA 2021 (Pa. Super. 11/15/2022) (non-precedential).

Although the case does not involve issues of estate administration, the resolution of the case may be of interest to practitioners who prepare family partnership agreements and buy-sell agreements as part of their estate planning services.

Trust Created by Agent under Invalid Power of Attorney is Void

Posted on by August 24, 2023

The Supreme Court has reversed the Superior Court and ruled that when a trust is created by an agent acting under a power of attorney that is void ab initio, the trust is also void. In re: Joseph L. Koepfinger, ___ Pa. ___, ___ A.3d ___, 20 WAP 2022 (8/22/2023), rev’g 123 WDA 2020 (Pa. Super. 2/4/2021) (non-precedential).

[DBE Comments: In my report of the allowance of the appeal by the Supreme Court, I noted that the Superior Court’s opinion was “largely incoherent.” In its opinion, the Supreme Court stated that “Respectfully, it is not entirely clear what the Superior Court ultimately held, as it did not directly address the issue at the heart of this matter, i.e., whether the judicial determination that the POA was void ab initio rendered the trust invalid.”]

Trustee Removed and Assessed Legal Fees

Posted on by August 18, 2023

The trustee was properly removed for commingling trust assets with his own, failing to make distributions in accordance with the trust instrument, and making distributions to himself without the approval of a disinterested trustee as required by the trust instrument. The Orphans’ Court properly directed distributions to one beneficiary because the trustee had denied distributions based on criteria outside of the trust instrument, but erred in directing distributions to another beneficiary because there was inadequate evidence as to the financial needs of that beneficiary. The court did not abuse its discretion in ordering the trustee to pay legal fees and costs of the beneficiaries for obdurate and vexatious conduct before and after the petition for removal was filed. Hallowell v. Hallowell, 1157 MDA 2022 (Pa. Super. 8/15/2023) (non-precedential).

Genetic Testing Determinative of “Issue”

Posted on by August 18, 2023

A claimant born during the marriage of the decedent and the person’s mother, and “held out” by the decedent as a child of the decedent, was nevertheless not an “issue” entitled to an intestate share of the decedent’s estate when genetic testing initiated by the claimant showed that the decedent was not his father. Estate of John Robert Rose, 1164 WDA 2022 (Pa. Super. 8/17/2023) (non-precedential).

Executor under Prior Will Lacked Standing in Will Contest

Posted on by January 21, 2024

The sister of the decedent, who was the decedent’s sole intestate heir but whose only interest under the previous will of the decedent (from 1987) was as an executor, had no standing to appeal from the probate of the decedent’s 2019 will under 20 Pa.C.S. § 908(a), the possibility of the prior will being held invalid being “too remote and speculative to confer standing.”  In re: Estate of Mary Ellen Netzel, 984 WDA 2022 (Pa. Super. 8/11/2023) (non-precedential), aff’g, 1 Fid.Rep.4th 223 (Allegheny O.C. 2022) (see “Niece Not Named in Prior Wills Did Not Have Standing to Contest Later Will“).

Proposed Amendment to Appellate Procedure for Orphans’ Court Appeals

Posted on by August 11, 2023

The Appellate Court Procedural Rules Committee has proposed changes to the Rules of Appellate Procedure that would require the notice of appeal in an appeal from the Orphans’ Court to specifically state that it is an Orphans’ Court appeal, which is defined as an appeal under Pa.R.A.P. 342. According to the committee, the amendments are intended to reflect the operation of Pa.R.O.C.P. 4.6, which is similar to Pa.R.Civ.P. 236 and establishes the date of entry of an adjudication or decree in the Orphans’ Court. “Proposed Amendment of Pa.R.A.P. 102 and 904,” 53 Pa.B. 4962 (8/12/2023).

Possible Undue Influence in Trust Modification

Posted on by August 11, 2023

On remand from the Supreme Court, the Superior Court has held that, even if the settlor and beneficiaries could modify an irrevocable trust to allow the beneficiaries to remove and replace trustees, the modification might still be void for undue influence by the beneficiaries over the settlor. For an inter vivos transaction, only a confidential relationship needs to be shown in order to create a presumption of undue influence, not weakened intellect or substantial benefit, and allegations that children of the settlor conducted an “escalating pattern of direct contact” and “exploited” their positions as “beloved children” were sufficient to survive a motion for summary judgment. Finally, it was error for the Orphans’ Court to sua sponte raise the issue of the standing of the executor of the settlor’s estate when the parties had waived the issue by not raising it. Trust under Deed of Walter R. Garrison, 2023 PA Super 151, ___ A.3d ___ (8/8/2023), affirming in part, vacating in part, and remanding 10 Fid.Rep.3d 189 (Montgomery O.C. 2020), after remand by ___ Pa. ___, 288 A.3d 866 (2023).

[DBE Comment: The conclusion that children might have a “confidential relationship” with a parent merely because they are loved by the parent would seem to open up new opportunities for intra-family litigation.]

Legal Fees of Trustee Denied as Excessive

Although trustees may employ legal counsel to advise them about discretionary distributions, and to negotiate settlements with beneficiaries, the requested legal fees were largely denied because they were excessive, imprudent, and disproportionate to the value of the trust. Mandell Trust, 12 Fid.Rep.3d 463 (Montgomery O.C. 2022)

JCP Fee Expired in Part

Posted on by August 3, 2023

For many years, Registers of Wills and Clerks of the Orphans’ Courts have been collecting fees usually designated as “JCP” fees for the Judicial Computerization Project (funded by the “Judicial Computer System Augmentation Account” established by Subchapter C of 42 Pa.C.S. Ch. 37), but sometimes designated “JCP/ATJ” because part of the fees are deposited to the “Access to Justice Account” established by the Access to Justice Act, 42 Pa.C.S. Ch. 49. These fees have been collected by the Register with the other fees for the filing of a petition for the probate of a will or the grant of letters, and by the Clerks of Orphans’ Courts for the initiation of any “civil action or legal proceeding.”

Section 35 of the Act of July 11, 2022, P.L. 540, No. 54, amended the Fiscal Code (Act of April 9, 1929, P.L. 343, No. 176) to add surcharges of $10.00 and $11.25 to the fees of $19.00 that had previously been collected, so that the total JCP fees were $40.25. See subsections (b)(3) and (c)(1)(iv) of section 1795.1-E of the Fiscal Code, as amended.

However, those new fees were expressly temporary, and expired on July 31, 2023.

Because the temporary surcharge of $21.25 has expired, the correct JCP fee should be $19.00 and not $40.25. However, it is not yet clear that Registers or Clerks have changed their filing fee practices, perhaps out of fear that the legislature has not yet completed its budget and the temporary surcharges might be reimposed retroactively.

A search of pending legislation failed to turn up any bill that would amend the relevant section of the Fiscal Code to reimpose a surcharge on filing fees. House Bill 611, PN 1811, which has passed both houses and has been signed in the House but not the Senate, makes an appropriation from the Judicial Computer System Augmentation Account but makes no changes to the funding of that account.