In Re: Werner, I. Appeal of: Werner, M.
149 A.3d 338
| Pa. Super. Ct. | 2016Background
- Melanie (custodian) and Eric adopted Isabelle and Sophia; two UTMA custodial accounts were funded (~$125,000 each) for the children’s benefit.
- In May–June 2010 Melanie withdrew the UTMA funds ($252,688.90) into her account and used $235,000 to buy a house (the Centennial House) titled solely in her name.
- The children filed a PUTMA action (2013) seeking an accounting and damages; the Centennial House later sold for $507,000 and proceeds were placed in escrow.
- The Orphans’ Court found Melanie breached her fiduciary duties under PUTMA and awarded the children the full sale proceeds ($507,000) as damages, reasoning Melanie commingled funds and could not segregate her contributions.
- The Orphans’ Court denied the children’s request to shift their attorneys’ fees to Melanie; both sides appealed and the Superior Court consolidated the appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Melanie’s withdrawal and use of UTMA funds to buy a house titled in her name breached PUTMA duties | Children: Custodial funds were misappropriated; custodian must use property for minor’s benefit | Melanie: Transfer under PUTMA is irrevocable and minors retained ownership; she acted in good faith for children’s benefit | Breach: Court held Melanie breached fiduciary duties—purchase not primarily for children’s benefit |
| Whether children suffered compensable damages from the retitling/usage | Children: Loss of access, lost investment return, and delay of funds; harmed by litigation delay | Melanie: No proven loss; merely a retitling; purchase increased value and she added personal funds | Damages: Court awarded full sale proceeds as remedy due to commingling and inability to trace personal contributions |
| Proper remedial measure for breach under PUTMA (including awarding appreciation) | Children: Remedies should make them whole, including interest/appreciation and fees | Melanie: Remedy limited to returning original custodial amount; improvements and appreciation partly hers | Remedy: Court held PUTMA permits broad remedies; awarded full sale proceeds because Melanie commingled and failed to trace her funds |
| Whether attorneys’ fees should be shifted to Melanie (under PUTMA or 42 Pa.C.S. §2503) | Children: Fee-shifting permitted to make minors whole and as sanction for vexatious/bad-faith conduct | Melanie: No statutory authorization for fee-shifting; no bad-faith or vexatious conduct shown | Fees: Court affirmed denial of fee-shifting—found Melanie’s litigation conduct not sufficiently egregious |
Key Cases Cited
- In re Estate of Bechtel, 92 A.3d 833 (Pa. Super. 2014) (standard of review for Orphans’ Court findings)
- Sternlicht v. Sternlicht, 822 A.2d 732 (Pa. Super. 2003) (custodian may not use PUTMA funds to benefit self; use must be for minor’s primary benefit)
- Radakovich v. Radakovich, 846 A.2d 709 (Pa. Super. 2004) (custodial property under PUTMA is property of the minor)
- Sutliff v. Sutliff, 528 A.2d 1318 (Pa. 1987) (custodian owes trustee-like fiduciary duties under PUTMA)
- In re Gumpher, 840 A.2d 318 (Pa. Super. 2003) (consideration of other jurisdictions on permissible uses and remedies under UTMA)
- Mangiante v. Niemiec, 910 A.2d 235 (Conn. App. 2006) (recognizing fee-shifting may be necessary to make a minor whole in UTMA actions)
- Burns v. Kabboul, 595 A.2d 1153 (Pa. Super. 1991) (when invalid gift is commingled, donee bears burden to identify personal funds)