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HomeMy WebLinkAbout21-1996-413 OrphansIn re: ESTATE OF DALE B. FAILOR Late of Upper Allen TownshJp, Cumberland County, Pennsylvania HOFFER, P.J. IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA ORPHAN'S COURT DIVISION NO. 21-96-413 RE: MOTION FOR RECONSIDERATION Factual Background and Procedural History On March 26, 2004, Patsy A. Hertzler ("Hertzler"), Executrix of the Estate of Dale B. Failor, entered into a Purchase and Sale Agreement ("the Agreement") with The McNaughton Company ("McNaughton"). The Agreement contained terms and conditions for the sale of property in the estate known as the "Failor Farm." The present dispute arises from Paragraph 6.4 of the Agreement. This provision states: Seller [Hertzler], in addition to attempting to obtain the consent of all beneficiaries of Seller to this Agreement, shall, within sixty (60) days of this Agreement, petition the Cumberland County Court of Common Pleas (Orphan's Court Division) for approval of the terms of this Agreement. In light of this provision, Hertzler filed a "Petition for Hearing Re: Sale of Real Estate in Estate of Dale B. Failor" with the Court. Upon consideration of the Petition, the Court entered an Order on June 11,2004. That order decreed that Hertzler had properly entered into a sales agreement with McNaughton. The Order further set forth the process for obtaining court approval of the sale of the Failor Farm.~ Subsequent to the Order of June 11,2004, additional buyers, including Traditions of America, LLC and Charlan Group, L.P., submitted proposals for the purchase of the Failor Farm. Additionally, McNaughton submitted an amendment to its original sales Agreement. On July 27, 2004, The McNaughton Company ("McNaughton") filed a Motion for Reconsideration of subparagraphs (b), (c) and (d) of the Court's Order of June 11,2004. McNaughton contends that the Agreement of March 26, 2004 was a final and binding contract not conditioned upon Court approval. The Court heard oral argument on the Motion for Reconsideration on July 29, 2004 and August 6, 2004. Discussion I. The Purchase and Sale Agreement of March 26, 2004 requires court approval. It is settled law in Pennsylvania that while an executor may have the express power to sell a decedent's property without obtaining court approval, the executor may nonetheless include in a sales agreement a The pertinent paragraphs of the Order of June 11,2004 provide as follows: "(b) The Court hereby sets a hearing to determine whether court approval of a contract with the McNaughton Company, or a denial of such approval and the approval of another competing offer, is in the best interests of the Estate of Dale B. Failor and its beneficiaries... (c) Any offerors, in addition to the McNaughton Company, shall make themselves known to Peter Ressler, Esquire, counsel for the McNaughton Company and to this Court in a timely fashion and shall file their proposed offers with the Clerk of the Orphans' Court... (d) After said hearing the Court shall fashion its own final Order as it deems best, including further findings, terms and conditions as it deems most appropriate in the circumstances to be issued at a time deemed appropriate by the Court." 2 provision making the sale conditional upon the approval of the Orphan's Court. See Pennsylvania Std. Practice 2d § 152:126. Furthermore, court approval of an agreement is not "pro forma" and is contingent upon the court's determination that the sale is in the best interests of the estate. Id. See also In the Matter of Est. of Penrose, 486 Pa. 9, 12 (1979) (stating that although the testamentary grant to the executors of the estate relieved them of a requirement to seek court approval of a sale of estate property, the executors were permitted to include in the agreement a provision making the sale subject to approval of the Orphans' Court). These principles are illustrated in cases similar to the instant action. In In re Est. of Lazarus, 420 Pa. Super. 379 (1992), the Superior Court affirmed the lower court's disapproval of a sales agreement for land in an estate and its subsequent approval of a different agreement. The sales agreement provided that "this Agreement is specifically conditioned upon Seller obtaining Court approval of this sale and the above-mentioned Purchase Money Mortgage." Id. at 381-82. Reasoning that the provision operated as a "condition precedent," the court concluded that the lower court did not err in evaluating all the offers and granting approval of a specific offer "in light of the best interests of the beneficiaries." Id. at 386. See also In re Matter of Samson, 442 Pa. Super. 545 (1995) (concluding that a section of the sales agreement stating "in order to satisfy conditions and restrictions of the Trust Agreement, Sellers will seek court approval for leave to consummate the sale of the assets.." made the agreement contingent on court approval). Similar to the agreements in Lazarus and Samson, the Purchase and Sale Agreement of March 26, 2004 is conditioned on approval of the Court. Paragraph 6.4 of the Agreement expressly states that the Seller "shall, within sixty (60) days of this Agreement, petition the Cumberland County Court of Common Pleas (Orphan's Court Division) for approval of the terms of this Agreement." The difference in this language from the language of the court approval provisions in Lazarus and Samson does not yield a different result. Despite any variation in language, the meaning and underlying purpose are the same. Thus, while the court approval provision in Lazarus uses the language "specifically conditioned," the language in the McNaughton Agreement similarly conditions execution of the Agreement by requiring the Seller to petition the Court for approval. It would be illogical and superfluous for the Executor to Petition the Orphan's Court for approval pursuant to Paragraph 6.4, but not actually need court approval to fully execute the agreement. To hold otherwise would contravene the plain language of the Agreement and the intent of the parties.2 2 In putting together the bargaining of this contract, McNaughton merely could have refused to sign the final agreement if this paragraph was unacceptable. 4 II. 20 Pa.C.S.A. § 3360 is inapplicable to the Purchase and Sale Agreement of March 26, 2004 because the agreement requires court approval. In support of its Motion, McNaughton asserts that 20 Pa.C.S.A. § 3360 binds Hertzler to the Purchase and Sale Agreement of March 26, 2004. McNaughton contends that this section of the PEF code precludes the Court from setting the Purchase and Sale Agreement of March 26, 2004 aside, even if the consideration for the Agreement is inadequate or the estate receives a better offer. Subsection (a) of this statute, entitled "Inadequacy of consideration or better offer," states: When a personal representative shall make a contract not requiring approval of court or when the court shall approve a contract of a personal representative requiring approval of the court, neither inadequacy of consideration, nor the receipt of an offer to deal on other terms shall, except as otherwise agreed by the parties, relieve the personal representative of the obligation to perform his contract or shall constitute ground for any court to set aside the contract... 20 Pa.C.S.A. § 3360(a) (emphasis added). Section 3360 is triggered only in two situations: (1) when a personal representative makes a contract not requiring court approval; or (2) when a court has already approved the contract of a personal representative requiring court approval. Lazarus, 420 Pa. Super. at 384. Accordingly, if an agreement does require court approval, Section 3360 does not prohibit a personal representative from entertaining subsequent offers or the court from disapproving the agreement. See Lazarus, 420 Pa. Super. at 384 (holding an agreement fell into neither category of Section 3360 because the agreement required court approval and affirming the Orphan's Court disapproval of an agreement); Samson, 442 Pa. Super. at 549 (finding the agreement did not fall under Section 3360 because it required court approval). As discussed in the preceding section, the Purchase and Sale Agreement of March 26, 2004 is contingent upon approval of the Orphan's Court. By its Order of June 11, 2004, this Court commenced the process of determining what agreement, if any, to approve for the sale of the Failor Farm. To date, the Court has not approved the Agreement. Accordingly, Section 3360 has not yet been triggered and the Court may disapprove or set aside the Agreement if it determines that it is not in the best interests of the estate. In re: ESTATE OF DALE B. FAILOR Late of Upper Allen TownshJp, Cumberland County, Pennsylvania IN THE COURT OF COMMON PLEAS CUMBERLAND COUNTY, PENNSYLVANIA ORPHAN'S COURT DIVISION NO. 21-96-413 ORDER OF COURT AND NOW, this 1st day of September, 2004, upon consideration of The McNaughton Company's Motion for Reconsideration and the briefs submitted by The McNaughton Company, the Estate of Dale B. Failor and Charlan Group, L.P., and after hearing oral arguments, it is hereby ORDERED that The McNaughton Company's Motion for Reconsideration is DENIED and the Court's Order of June 11,2004 is REAFFIRMED in its entirety. The Court hereby directs an office conference with the attorneys for The McNaughton Company, the Estate of Dale B. Failor and the Charlan Group, L.P. to decide the next practical step in dealing with interested bidders of the Failor Farm. The attorneys are requested to contact the Court, in a coordinated effort, with available dates. By the Court, George E. Hoffer, P.J. David E. Lehman, Esquire McNees, Wallace & Nurick, LLC 100 Pine Street Harrisburg, PA 17055 Counsel for The McNaughton Company Charles E. Shields, III, Esquire 6 Clouser Road Mechanicsburg, PA 17055 Counsel for the Estate of Dale B. Failor Mark D. Bradshaw Stevens & Lee P.O. Box 11670 Harrisburg, PA 17108 Counsel for Charlan Group, L.P.