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HomeMy WebLinkAbout07-19-04 (2) Joarme Book Christine, Esquire Attorney I.D. No. 82028 Heather Zink Kelly Attorney I.D. No. 86291 RHOADS & SINON LLP One South Market Square, 12th Floor P.O. Box 1146 Hamsburg, PA 17108-1146 (717) 233-573l Attorneys for PNC Bank, N.A. IN RE: ESTATE OF IN THE COURT OF COMMON PLEAS OF MILDRED J. GERBER, CUMBERLAND COUNTY, PENNSYLVANIA an Incapacitated Person ORPHANS' COURT DIVISION No. 21-01-92 IN RE: IN THE COURT OF COMMON PLEAS OF MILDRED J. GERBER TRUST CUMBERLAND COUNTY, PENNSYLVANIA UNDER AGREEMENT DATED ORPHANS' COURT DIVISION DECEMBER 19, I997 NO. 21-2002-0540 PRE-HEARING MEMORANDUM PNC Bank, N.A., by and through counsel, Rhoads & Sinon LLP, submits this Pre- Hearing Memorandum pursuant to the direction of the Auditor, William A. Duncan, Esquire, appointed by Orders of Court dated November 25, 2003 in the above matters. II. Procedural History 1. In the first above captioned action, PNC Bank, N.A. ("PNC") was appointed Guardian of the Estate of Mildred J. Gerber (hereinafter the "Guardianship Estate") on March 22, 2001. 2. Frederick E. Gerber, II, was appointed Plenary Guardian of the Person of Mildred J. Gerber on December 21, 2001. 3. In the second above captioned action, on October 3, 2001, acting as Guardian of Mildred J. Gcrber, PNC removed Frederick E. Gerber, II, as Trustee and designated PNC as Successor Trustee of the Mildred J. Gerber Revocable Trust, dated December 19, 1997, as amended and restated (hereinafter the "Trust"). 4. Mildred Gerber died on January 14, 2003, survived by three children, Marilyn J. Gerbcr, Frederick E. Gerber, II, and Jane N. Heflin. 5. On October 24, 2003, PNC filed an accounting of its administration of the Guardianship Estate since the time that PNC was appointed Guardian on March 22, 2001 (the "Guardianship Account"). The Guardianship Account states transactions from March 23, 2001 through October 20, 2003. 6. On October 24, 2003, PNC filed an accounting of the administration of the Trust since the time that PNC became Successor Trustee on October 3, 200I (the "Trust Account"). The Trust Account states transactions from Octobcr 3,2001 through October 20, 2003. 7. On or about November 21, 2003, Marilyn J. Gerber ("Ms. Gerber"), Mildred Gerber's daughter, filed Objections to both the Trust Account and Guardianship Account. 8. By Orders dated November 25, 2003, this Court appointed William Duncan, Esquire as Auditor in both of the above matters to hear the Objections filed by Ms. Gerber to the Trust Account and Guardianship Account. 9. In a matter no longer involving PNC, both PNC and Ms. Gerber filed objections to accountings that Frederick E. Gerber, II, filed for the time period during which he acted as Trustee of the above Trust, as well as Trustee of the Frederick E. Gerber Revocable Trust dated July 29, 1994. PNC was substituted by Jacqueline Verney, Esquire, by Order of this Court dated June 27, 2003, to pursue the objections filed to the accountings filed by Frederick E. Gerber, II. -2- II. Issues 10. Most of Marilyn J. Gerber's Objections to both thc Guardianship Account and the Trust Account allege that PNC has l~ailed to provide documentation for each transaction shown in the Accounts. 11. Mafilyn J. Gerber objects to the fees for services and extraordinary services charged by PNC as Guardian and Trustee. (See Objections 5~] 28, 54, 82, 84, 98). 12. Marilyn J. Gerber objects to the fees of Rhoads & Sinon, LLP, as attorney for PNC. (See Objections '~['I[ 80, 83). 13. Marilyn J. Gerber objects to PNC's failure to immediately take over the administration of the Trust upon its appointment as Guardian on March 22, 2001. (See Objections ~l 74). 14. Marilyn J. Gerber objects to PNC's investment of the assets of the Trust. (See Objections '~[ 78). III. Witnesses 15. PNC proposed to present testimony of David Brown, Vice President and Trust Officer of PNC; expert witness testimony of W.K. "Dusty" Chapman, CAGA, owner of Claude C. Wolfe & Associates, Appraisers and Auctions, which was taken by deposition for purposes of trial because of Mr. Chapman's unavailability on August 16-17, 2004; and Postmaster W. Thomas Brown of New Cumberland, PA. 16. Mr. Brown is expected to testify concerning the administration of the Guardianship Estate and Trust by PNC, the investment of the assets of the Guardianship Estate and Trust by PNC, PNC's communications and interactions ~vith the family of Mildred J. Gerber, the customary and extraordinary services performed by PNC, and all other matters relating to the Trust Account and Guardianship Account filed by PNC. 17. Mr. Chapman provided expert witness testimony concerning the appraisal of the tangible personal property of Mildred J. Gerber. 18. Mr. Brown is expected to testify concerning PNC's efforts to forward the mail of Mildred J. Gerber to its office upon its appointment as Guardian. 19. PNC reserves the right to call an attorney from Rhoads & Sinon LLP to testify concerning its fees. IV. Time of Hearing 20. PNC estimates that it ~vill require one-half day to present its defense at the hearing. V. Legal Argument. 21. The form and contents of the Guardianship Account and Trust Account complied ~vith Rule 6.1 of the Pennsylvania Supreme Court Orphans' Court Rules. Thus, Ms. Gerber's allegation that PNC failed to provide documentation supporting each transaction in the Accounts is without merit. Ho~vever, this issue is now moot because PNC has provided Ms. Gerber with all non-privileged documents supporting the transactions in the Accounts in discovery. 22. The test for determining the appropriateness of the fees charged by fiduciaries and other professionals for services rendered in the administration of a fiduciary estate is whether the fee is reasonable and just under the circumstances. 20 Pa. C.S.A. §3537, 7185. 23. PNC's fees, based on its standard fee schedule, and its fees for extraordinary services, are reasonable based on the extensive hours incurred by the personnel of PNC in administering the Guardianship Estate and Trust. Extraordinary amounts of time were incurred -4- and extraordinary services ~vere performed due to various factors including the continuous litigation that was ongoing in these matters, requiring the presence and testimony of PNC personnel, and the difficulty in dealing ~vith the family of Mildred J. Gerber. 24. The reasonableness of attorneys fees is within the discretion of the auditing judge, and is determined by examining the amount of work; the character of the services; 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 was "created" by the attorney; the professional skill and standing of the attorney; the results the attorney was able to obtain; and the ability of the client to pay a reasonable fee for services rendered. LaRocca Estate, 431 Pa. 542, 246 A.2d 337 (1968); Brunet Estate, 456 Pa. Super. 705, 691 A.2d 530 (1997). 25. The attorneys fees of Rhoads & Sinon LLP are reasonable and supported by evidence including but not limited to the records of hours which have been produced to Ms. Gerber in discovery, the continuing and varied litigation that occurred throughout the administration of the Guardianship Estate and Trust as supported by the extensive docket records in these matters, most of which was initiated by parties other than PNC, and the difficulty of dealing with the family members of Mildred Gerber and their counsel. 26. Pennsylvania trustees and guardians are governed by the Prudent Investor Rule found in 20 Pa. C.S.A. §7203, which states that: "A fiduciary shall invest and manage property held in a trust as a prudent investor would, by considering the purposes, terms and other circumstances of the trust and by pursuing an overall investment strategy reasonably suited to the trust." The degree of care is set forth in 20 Pa. C.S.A. §7212, which provides that the fiduciary shall exercise reasonable care, skill and caution in making and implementing investment and management decisions, and a fiduciary which represents that it has special investment skills must exercise those skills. The judgment ofa fiduciary's decisions is set forth in 20 Pa. C.S.A. §7213, which provides that compliance with the Prudent Investors Rules must be determined in light of the facts and circumstances prevailing at the time of the fiduciary's conduct, not hindsight. 27. PNC's investment and management of the property of the Guardianship Estate and Trust were consistent with the Prudent Investor Rule. At all times, PNC exercised reasonable care, skill and cautions, and its actions were reasonable in light of the facts and circumstances at the time of the conduct in question. 28. Based on the allegations, evidence and testimony presented thus far, Ms. Gerber will be unable to establish that PNC should be surcharged for any transaction reported in the Accounts and for its actions as Guardian and Trustee. 29. Surcharge is defined as the penalty for failure to exercise common prudence, common skill and common caution in the performance of fiduciary duties. In re Estate of Dobson, 490 Pa. 476, 417 A.2d 138 (1980); in re Estate of Campbell, 692 A.2d 1098 (Pa. Super. 1997). Sumharge is awarded to compensation beneficiaries for loss occasioned by a fiduciary's breach of one or more of the duties owed to them. Restatement (Second) of Trusts, §204. 30. The general standard of care to which a fiduciary is held in Pennsylvania is such common skill, judgment and caution as persons of ordinary prudence, discretion and intelligence under similar circumstances, would exercise in the management of their own estate. See Campbell, 692 A.2d at 1103. However, where a fiduciary has greater skill than that of a man of ordinary prudence, the fiduciary is required to exercise that greater skill. Estate of Pew, 440 Pa. Super. 195,655 A.2d 52i (1994). 31. Generally, those seeking surcharge bear the burden of proving, by a fair preponderance of the evidence, the breach and the loss. Estate of Pe~y, 440 Pa. Super. 195, 655 A.2d 521 (1994). 32. Based on the allegations and evidence presented thus far, Ms. Gerber will be unable to carry her burden to establish any breach of duty by PNC. Respectfully submitted, PO:lOADS & SINON LLP By: ~/Joar~ne Book Christine He!}ther Zink Kelly Or~e South Market Square P. O. Box 1146 Harrisburg, PA 17108-1146 (717) 233-5731 Attorneys for PNC BANK, N.A. -7- CERTIFICATE OF SERVICE I hereby certify that on July 15, 2004, a tree and correct copy of the foregoing document was served by means of hand delivery upon the following: Marilyn J. Gerber 717 Market Street, #317 Lemoyne, PA 17043 Richard C. Rupp, Esquire Rup£ and MeiMe 335 North 21st Street, Suite 205 Camp Hill, PA 17011 /J~oan~e Book Christine 516513