UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
March 29, 1985
NOONE, MARGARET R. INDIVIDUALLY AND AS CO-EXECUTOR OF THE ESTATE OF JOHN J. NOONE, DECEASED, APPELLEE
COLE, TIMOTHY W.; COLE, MARGARET N.; COLE, ELIZABETH M.; COLE, T. MARK; COLE, VICTORIA M.; COLE, JENNIFER A; C HORSE FARM, INC., APPELLANTS MARGARET R. NOONE, INDIVIDUALLY AND AS CO-EXECUTOR OF THE ESTATE OF JOHN J. NOONE, DECEASED, APPELLEE V. TIMOTHY W. COLE; MARGARET N. COLE; ELIZABETH N. COLE; T. MARK COLE; VICTORIA M. COLE; JENNIFER A COLE; JOHN J. NOONE, JR.; TIMOTHY W. COLE AND MARGARET N. COLE, APPELLANTS NOONE, MARGARET R. INDIVIDUALLY AND AS CO-EXECUTOR OF THE ESTATE OF JOHN J. NOONE, DECEASED, APPELLEE V. COLE, TIMOTHY W.; COLE, MARGARET N.; COLE, ELIZABETH M; COLE, T. MARK; COLE, VICTORIA M; COLE, JENNIFER A., C HORSE FARM, INC.
On Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 82-4823, (Sat Below: Honorable Donald W. Van Artsdalen). On Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 82-0539, (Sat Below: Honorable Donald W. Van Artsdalen).
BEFORE: HUNTER and GARTH Circuit Judges and GERRY, District Judge*fn*
MEMORANDUM OPINION OF THE COURT
GARTH, Circuit Judge :
Factual and Procedural History
The present appeals are from the final judgments entered at district Court Nos. 82-0539 and 82-4823. The two district court cases were tried together without a jury. Two separate orders were entered on June 29, 1984.
Appellee Margaret R. Noone, a citizen of New Jersey, filed her first complaint on February 5, 1982 in the district court court docketed at Civil Action No. 82-0539 seeking an equitable accounting from her daughter, Margaret N. Cole, her son-in-law, Timothy W. Cole and her son John Noone, Jr.*fn1 She sought the return of all assets belonging to her and/or the estate of her late husband, John J. Noone, Sr., that the Coles had converted as a result of their confidential relationship with Margaret Noone and John J. Noone, Sr. Appellants Margaret Cole and Timothy Cole, husband and wife, reside at C Horse Farm in Chadds Ford, Pennsylvania. Margaret Cole is a co-executrix with Margaret Noone of the estate of John J. Noone, Sr.
Before John Noone, Sr. died, he executed a general power of attorney appointing Timothy Cole as his attorney-in-fact. Margaret Noone also executed a power of attorney to Timothy Cole after her husband's death.
After the appointment of Timothy Cole as attorney-in-fact for John Noone, Sr. in October, 1979, the Coles actively managed the financial affairs of both Margaret Noone and John Noone, Sr. The Noones' bills were sent to the Coles' C Horse Farm address, and the Coles took the responsibility of paying those bills.
Margaret Noone's request for an accounting centered around three discrete sets of assets, only one of which is before us on this appeal. Margaret Noone sought on behalf of the estate of John Noone, Sr., the proceeds from the sale of stock in the John J. Noone brokerage account.
The Coles owned 28.111 acres of land in Chadds, Fords, Pennsylvania, known as C Horse Farm. By deed dated February 4, 1982, Timothy and Margaret Cole conveyed the entire 28.111 acres of C Horse Farm to the Cole children for the consideration of $1.00. Elizabeth M. Cole, T. Mark Cole, Victoria M. Cole, and Jennifer A. Cole (the Cole children) are the adult children of Timothy and Margaret Cole, and the grandchildren of Margaret Noone. The Cole children all are citizens of Pennsylvania.
By deed dated September l, 1982, the Cole children conveyed 21.755 acres of the C Horse Farm property to C Horse Farm, Inc. for the consideration of $1.00. C Horse Farm, Inc. is a corporation organized under the laws of Pennsylvania with its principal place of business in Chadds Ford, Chester County, Pennsylvania. The Cole children are the sole shareholders of C Horse Farm, Inc. T. Mark Cole is chairman and president of the corporation, Victoria Cole is treasurer of the corporation, and Margaret Cole is secretary of the corporation.
On November 1, 1982, Margaret Noone filed her second complaint at Civil Action No. 82-4823 seeking to set aside as a fraudulent conveyance the transfer of the property known as C Horse Farm from Margaret and Timothy Cole to the Cole children.
The district court found that the Coles were under a duty to account for the proceeds of the assets belonging to Margaret Noone and John J. Noone, Sr. and entered a final judgment in favor of Margaret Noone, individually, and in her capacity as co-executrix of the estate of John J. Noone, Sr. Timothy Cole and Margaret Cole appeal from that part of the order entered at Civil Action No. 82-0539 in favor of Margaret R. Noone, in her capacity as co-executrix of the Estate of John J. Noone, Sr. No appeal has taken from the judgment in favor of Margaret Noone as an individual.
The district court also afforded relief to Margaret Noone at Civil Action No. 82-4823 by setting aside the conveyance from Timothy Cole and Margaret Cole to their adult children and the conveyance from the Cole children to C Horse Farm, Inc. Timothy W. Cole, Margaret N. Cole, Elizabeth M. Cole, T. Mark Cole, Victoria M. Cole, Jennifer A. Cole, and C Horse Farm appeal from the final judgment at Civil Action No. 82-4823.
The appeals from the two final judgments will be discussed separately.
Appeal from District Court No. 82-0539
Timothy W. Cole and Margaret N. Cole appeal from the final order entered at District Court No. 82-0539 in favor of R. Noone, in her capacity as co-executrix of the Estate of John J. Noone, Sr. The district court held that the disputed proceeds from the sale of John Noone's stock belonged to the John J. Noone, Sr., estate.
The issues presented on this appeal are: (1) whether the district court erred in ruling that the burden of proof shifted to the Coles to account for the disposition of the securities belonging to the estate of John Noone, Sr., and (2) whether the trial court erred in not finding that John J. Noone, Sr. transferred all right, title and interest in his securities to John J. Noone, Jr. at the March 1979 family meeting.
The standard of review concerning findings of fact is governed by Federal Rules of Civil Procedure, Rule 52(a) which provides in pertinent part that "findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses." Questions of law are subject to plenary review.
Having carefully reviewed the record in light of the foregoing standards, we affirm the order at No. 82-0539 for substantially the reasons expressed by the district court.
Under the Pennsylvania Rules Civil Procedure, Rule 1530(b), evidence presented on the duty to account and the accounting itself may be consolidated into a single proceeding. Once the plaintiff establishes both the existence of a confidential relationship and that a defendant has taken possession of money or property belonging to the plaintiff by means of the confidential relationship, the burden of proof shifts to the defendants to explain or account for the disposition of the plaintiff's money or property. See, Ringer v. Finfrock. 340 Pa. 458, 462, 17 A.2d 348, 351 (1941).
The existence of a confidential relationship often is a question of fact. Id. at 350. In the present case, the Coles admitted that they stood in a confidential relationship with Margaret R. Noone and John Noone, Sr. Furthermore, the record supports the existence of such a relationship.
Secondly, the general power of attorney from John Noone, Sr. provided Timothy Cole with access to John Noone, Sr.'s securities. Margaret Noone demonstrated that the Coles took possession of the proceeds from the sale of securities in the "John J. Noone" brokerage account which did not differentiate Jr. or Sr.
Because Margaret Noone established the existence f a confidential relationship and that the Coles had access to the securities belong to John J. Noone, it was not error for the trial court to shift the burden of proof to the Coles.
This leads to the second issue presented. The Coles argue that the John J. Noone shares were given to John Noone, Jr., and, therefore, the Coles are not obligated to account for the proceeds of these assets. The burden is on the Coles to demonstrate that John J. Noone, Sr. intended a gift to his son of the shares under the name of John J. Noone since Margaret Noone established a duty to account. See, Ringer, supra. Margaret Cole testified that she observed Margaret Noone opening the safe deposit box belonging to John Noone, Sr. and that 90-95% of her father's stock were in her brother's name. Shortly thereafter, at a family meeting in the Noones' residence, John Noone, Sr. expressed his intention to clear out his estate before he died. At that point, John Noone, Sr. turned over his stock to Timothy Cole to sell and distribute.
The intention to relinquish control, and the actual physical delivery of the shares to the brokerage accounts is clear and convincing evidence that the ownership of the shares passes to the persons under whose names the shares were registered. McClements v. McClements, 411 Pa. 257, 191 A.2d 814 (1963).
Although the district court held that the brokerage accounts registered in John Noone, Jr.'s name are the property of John Noone, Jr., an ambiguity remained as to the owner of the shares in the John J. Noone account which were not registered in the name of John Noone, Jr.
the court noted several inconsistencies in Margaret Cole's testimony that 90-95% of the shares were in John Noone, Jr.'s name, but aside from the issue of credibility, the Thomson McKinnon records indicate that a fairly substantial portion of the securities delivered to Thomson McKinnon were registered in Margaret Noone's name. Moreover, Margaret Cole testified that John Noone, Sr. expressed a desire to have his stock sold to get it "out of his name entirely." Such a request would have little meaning or purpose if John Noone, Sr. did not possess stock registered in his own name. The court further noted that no records or testimony ever refers to any stock as having been registered under the name John J. Noone, Sr. rather than simply John J. Noone. Moreover, John Noone, Jr. did not state that he directly received the John J. Noone shares and then passed them on to Timothy Cole.
In light of the foregoing, the factual findings by the strict court in resolving the ambiguity concerning the ownership of the John J. Noone shares were not clearly erroneous. The district court found that the shares remained the property of John Noone, Sr., and, thus, the Coles were under a duty to account to the estate of John Noone, Sr. for the proceeds from the sale of the securities in the John J. Noone account.
Appeal from District Court No. 82-4823
Timothy W. Cole and Margaret N. Cole as well as Elizabeth M. Cole, T. Mark Cole, Victoria M. Cole, Jennifer A. Cole and C Horse Farm, Inc. appeal from the final order entered at District Court No. 82-4823.
The issues presented are: (1) whether the trial court erred in finding that on February 4, 1982, (the date which the Coles conveyed the 28.111 acres known as C Horse Farm to their children) Margaret N. Cole was insolvent as defined by Pennsylvania Statutes Annotated, Title 39, Section 352, and (2) whether the trial court erred in finding that the conveyances from Margaret Cole to her four adult children were fraudulent.
the Uniform Fraudulent Conveyance Act defines insolvency as follows:
(1) A person is insolvent when the present, fair, salable value of his assets is less than the amount that will be requiredto pay his probable liability on his existing debts as they become absolute and matured.
(2) In determining whether a partnership is insolvent, there shall be added t the partnership property the present, fair, salable value of the separate assets of each general partner in excess of the amount probably sufficient tomeet the claims of his separate creditors, and also the amount of any unpaid subscription to the partnership of each limited partner, provided the present, fair, salable value of the assets of such limited partner is probably sufficient to pay his debts, including such unpaid subscription. 1921, May 21, P.L. 1045, No. 379, § 2.
Pa. Stat. ann. tit. 39 § 352 (Purdon 1954).
The district court found that the maximum possible value of Timothy Cole and Margaret Cole's assets as of February 4, 1982 was $270,600. this figure is based on Margaret Cole's estimate. The Coles' liabilities as of February 4, 1982, amounted to at least $113,000 plus $232.084.48 plus interest owed Margaret R. Noone, individually, and as co-executrix of the estate of John J. Noone, Sr. Since the present, fair, salable value of the assets is less than the amount that will be required to pay the probable liabilities on their existing debts, the district court did not err in finding that the Coles were insolvent.
The district court did not err in excluding from the Coles' assets the value of the six acres which Margaret Cole claims were mistakenly transferred to the four adult children. the question of insolvency is determined at the point when the conveyance is made. See, First National Bank of Marietta v. Hoffines, 429 Pa. 109, 239 A.2d 458 (1968). On February 4, 1982, Timothy Cole and Margaret Cole conveyed the entire property of C Horse Farm to the Cole children and were thereby rendered insolvent.
After reviewing the record in this case, we cannot say that the district court erred in excluding the six acres valued at $96,000 as part of the assets belonging to the Coles. It was not clearly erroneous for the district court judge to disregard Margaret Cole's testimony that the Coles intended to retain six acres in light of the surrounding circumstances and that the Cole sought to regain just enough property to render solvency.
Since the Coles were rendered insolvent by the conveyances made to their children, such conveyances were fraudulent, and, thus, properly set aside. See, Pa. Stat. Ann. tit. 39 §§ 354 and 359 (Purdon 1954).
For the foregoing reasons, the district court orders of June 29, 1984 at Nos. 82-0539 and 82-4823 will be affirmed.
TO THE CLERK:
Please file the foregoing opinion.