Court Orders Removal of Executrix Based on Conflict of Interest
In the estate administration and estate litigation appellate case of In Re Estate of Andrews, PICS Case No. 14-0874, (Pa. Super. May 29, 2014), the Honorable Mary Jane Bowes, writing on behalf of the Pennsylvania Superior Court, in a lengthy 17 page opinion ruled that the lower court properly removed appellant as Executrix based on conflict of interest where there was question whether she owed the estate money advanced to her during testatrix’s lifetime.
Decedent died testate on Oct. 6, 2011. On Oct. 20, 2011, the register of wills admitted to probate a will dated Oct. 1, 2010, and issued letters testamentary to appellant. The will provided that decedent’s residuary estate be divided equally among her four surviving daughters: appellant, Marjorie, Mary and Linda. Mary’s share was reduced by $25,000 advancement decedent made to her. Decedent appointed appellant executrix of her estate. The will provided that if appellant was unable or unwilling to serve, Marjorie, Linda and ultimately a bank were to take over.
On Jan. 23, 2013, Mary and Linda petitioned to compel the filing of an inventory, averring that appellant failed to do so upon their request in derogation of responsibilities imposed by 20 Pa.C.S. 3301 and that she was dissipating and hiding estate assets.
Simultaneously, petitioners sought to remove appellant as executrix, asserting that she had a conflict of interest in that appellant owed the estate in excess of $113,000. Petitioners requested that they be appointed co-executrixes. Appellant countered that the $113,000 allegedly owed to the estate was not a loan and was not subject to repayment.
At hearing, it was established that appellant was her mother’s power of attorney prior to her death. From 2002 to 2009, a series of 18 checks (totaling $110,675) were issued payable either directly to appellant or to her wholly-owned corporation from a banking account containing decedent’s assets. Some of the checks were signed by decedent while others were executed by appellant as power of attorney. Each check had “loan” written on the memo line. Appellant represented that she attempted to repay the amounts but her mother refused those attempts, forgave the debt and converted the transfers to gifts. Pointing out the fact that the will expressly charged Mary with the advancement made to her while omitting any reference to advancements made to appellant, appellant claimed that the money given to her did not have to be repaid to the estate,
The orphans’ court granted petitioners’ relief. Concluding that appellant’s position on the money she received jeopardized the estate interests, it removed appellant as executrix and appointed petitioners as co-executrixes in her stead.
Appellant argued on appeal that the trial court erred when it rendered a conflict of interest determination without first ascertaining whether the transferred money had to be repaid to the estate. The Superior Court affirmed in part and vacated in part.
Appellant was acting in derogation of her duty to garner estate assets by failing to attempt to recoup for the estate the amounts transferred to her. Likewise, appellant was engaging in an actual conflict of interest with the estate by claiming that the amounts transferred to her were not estate assets. As the personal representative, she had an obligation to take the opposite position. The checks plainly indicated that the amounts transferred were loans; that language provided the estate with a foundation for maintaining that the $110,675 was loaned to appellant and had to be repaid. Appellant’s insistence that she did not owe the estate the money demonstrated that she was acting in direct conflict to the interest of the estate, to which she owed a fiduciary duty. Thus, the court correctly removed her as executrix without first determining whether the money was a gift, a loan or an advance that did not have to be repaid.
Moreover, the orphans’ court’s decision to appoint Linda rather than Marjorie as successor executrix was not an abuse of discretion. Given the court’s factual finding regarding the connection between appellant and Marjorie, it was evident that the latter, as did appellant, would not seek to include the money transferred to appellant as assets of the estate and would also act contrary to the estate’s interests (Marjorie agreed that the money was a gift not a loan).
However, the court improperly named Mary co-administratrix. There was no provision in the will for the appointment of Mary. The people who can serve as personal representatives are limited to those who are designated in the will. Mary was not one of those people. The will stated that if Marjorie could not serve, Linda was to be appointed as sole executrix in Marjorie’s stead.
Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 37 PLWS 542 (June 10, 2014)
Filed Under Estate Administration; Estate Litigation; Removal of Executrix; Conflict of Interest.
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