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In re Trust of Mihordin

Superior Court of Pennsylvania

May 16, 2017

IN RE: TRUST OF MARILYN MIHORDIN, DECEASED APPEAL OF: VICKI MIHORDIN

          Appeal from the Order June 24, 2016 In the Court of Common Pleas of Mercer County Orphans' Court at No(s): No. 2014-660

          BEFORE: GANTMAN, P.J., BENDER, P.J.E., and MOULTON, J.

          OPINION

          GANTMAN, P.J.

         Appellant, Vicki Mihordin, appeals from the order entered in the Mercer County Court of Common Pleas, which granted the petition filed on behalf of Appellees Lynda J. Pozzuto and her former husband, Michael L. Pozzuto ("Pozzutos") for reformation of a deed. We reverse.

         The relevant facts and procedural history of this appeal are as follows. The Pozzutos sought to transfer property located in Rayburn Township, Armstrong County to Lynda Pozzuto's parents, Richard and Marilyn Mihordin ("Mihordins"). In 1995, the Pozzutos executed a Real Estate Sales Agreement ("1995 Agreement") between the Pozzutos as sellers and the Mihordins as buyers of a parcel of land. Michael Pozzuto contacted his counsel to prepare the 1995 Agreement. Pursuant to the 1995 Agreement, the Mihordins would pay the Pozzutos $5, 000.00 per year for a period of three years and an additional $5, 000.00 at closing for a total of $20, 000.00. The 1995 Agreement in full provides:

         AGREEMENT

THIS AGREEMENT, made this 28th day of March, 1995, by and between Mike Pozzuto and Lynda Pozzuto, his wife (hereinafter referred to as Sellers).
AND
Richard L. Mihordin and Marilyn R. Mihordin, his wife (hereinafter referred to as Buyers);
WHEREAS, the Sellers are in the process of purchasing certain property in Kittanning, Pennsylvania; and
WHEREAS, the Buyers wish to purchase some of the aforesaid property from the Sellers;
NOW THEREFORE, THE PARTIES INTENDING TO BE LEGALLY BOUND, AGREE AS FOLLOWS:
1. Sellers will sell and Buyers will purchase a parcel of land of Buyers choice fronting on 100 feet of river for the sum of $20, 000.00 payable at $5, 000.00 on day of closing and $5, 000.00 a year, each and every year for the succeeding three (3) years.
2. If Buyers decide to sell the aforesaid parcel, they give the Sellers the option to purchase the property for $20, 000.00. Said option to be exercised within 90 days after written notice received by Sellers from Buyers.
3. If Sellers would default on the purchase of the said property, they must refund the Buyers all hand monies paid by Buyers to Sellers.
4. Upon Buyers payment of the full purchase price to Sellers, they will receive a deed subject to any encumbrances then existing on the property.
5. Upon the death of Buyers, the land is to revert back to Sellers.
6. If Sellers sell the complete parcel of land, they will deed over the property of Buyers to Buyers.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day and year first above written.

(See 1995 Sales Agreement, attached as Exhibit A to the Pozzutos' Rule to Show Cause; Appellant's Brief, Appendix B at 17.) The Pozzutos and the Mihordins signed the 1995 Agreement.

         In 1998, the Pozzutos executed a deed transferring the riverfront parcel of property to the Mihordins in fee simple. (See Deed of September 10, 1998, attached as Exhibit B to the Pozzutos' Rule to Show Cause; Appellant's Brief, Appendix C at 18.) The scrivener of the 1995 Agreement was also the scrivener of the 1998 deed, Attorney William Panella. He did not refer to the 1995 Agreement in preparing the deed or include a reversionary interest in favor of the Pozzutos in the 1998 deed.

         Richard Mihordin died in May 2011. After his death, Marilyn Mihordin created the irrevocable Trust of Marilyn Mihordin on August 23, 2011, and transferred the subject parcel to the trust by virtue of a new deed of the same date. The trust provided, inter alia, that upon Marilyn Mihordin's death, any remaining income and principal or corpus of the trust would go to her two daughters equally. The named co-trustees and beneficiaries of the trust are her two daughters, Lynda Pozzuto and Appellant, who both signed the trust and agreed to accept the terms and conditions set forth in the trust. Neither the trust nor the 2011 deed (both prepared by different counsel) referred to any reversionary interest in favor of the Pozzutos. (See The Marilyn R. Mihordin Irrevocable Trust Agreement, attached as Exhibit 1 to Appellant's Answer to the Pozzutos' Rule to Show Cause; Appellant's Brief, Appendices D and E, at 19, 20.) Marilyn Mihordin died on October 22, 2014.

         On December 21, 2015, the Pozzutos filed a Rule to Show Cause Why A Deed Should Not Be Reformed, seeking to reform the 1998 deed to reflect their ownership of the property in question via a reversionary interest, asserting a scrivener's error or mistake as well as the intent of the parties as represented in the 1995 Agreement. Appellant filed an answer on January 12, 2016, and a counterclaim for enforcement of the 2011 deed in trust and an order directing the real estate to be distributed equally between the daughters pursuant to the trust. The Pozzutos filed their answer to the counterclaim on February 1, 2016, with new matter. Appellant replied to the new matter on February 12, 2016.

         The court held a hearing on February 23, 2016. By order of June 24, 2016, the court granted the Pozzutos' petition and directed the 1998 deed to be reformed to reflect the asserted reversionary interest in favor of the Pozzutos, consistent with Article five of the 1995 Agreement. Appellant timely filed a notice of appeal on July 20, 2016. On July 25, 2016, the court ordered Appellant to file a concise statement of errors complained of on appeal per Pa.R.A.P. 1925(b); Appellant timely complied on August 5, 2016.

          Appellant raises this issue on appeal:

DID THE [TRIAL] COURT COMMIT ERROR IN ORDERING THAT THE DEED IN QUESTION SHOULD BE REFORMED DUE TO SCRIVENER'S ERROR?

(Appellant's Brief at 4).

         Appellant argues this case presents the classic example of the merger doctrine, under which the 1995 Agreement merged with the 1998 deed, which superseded any provisions of the 1995 Agreement not included in the 1998 deed. Appellant maintains that none of the instruments executed after the 1995 Agreement, including the 1998 deed and the 2011 trust and 2011 deed, refer to a life estate or reversionary interest. Appellant reasons any reversionary interest allegedly in the 1995 Agreement was lost, once the 1998 deed and all later instruments did not include it.

         Additionally, Appellant argues the Pozzutos failed to prove a "scrivener's error" by clear and convincing evidence. Specifically, Appellant asserts Attorney Panella's testimony, which the trial court cited in its decision to allow reformation of the 1998 deed, was insufficient to meet the high standard of proof for reformation of the deed. Appellant directs our attention to Attorney Panella's testimony that he made no mistake when he prepared the 1998 deed. Appellant also claims Attorney Panella could not have known the Mihordins' intentions, because he had no contact with them and had not even met them. Appellant insists Attorney Panella's failure to refer to the 1995 Agreement when preparing the 1998 deed was not a mere "scrivener's error" under Pennsylvania law because he was the same attorney who prepared both documents. Appellant observes the Pozzutos presented no testimony from Attorney Carolyn E. Hartle, who drafted the 2011 deed and trust for Marilyn Mihordin, concerning Marilyn Mihordin's intentions. Regardless, Appellant maintains the Dead Man's Act would bar any testimony adverse to the intentions of Marilyn Mihordin, as expressed in her testamentary documents, because she is deceased. Appellant submits the Pozzutos failed to prove by clear and convincing evidence that the disputed reversionary interest was omitted from the 1998 deed solely by virtue of a "scrivener's error" or mistake. Appellant concludes the doctrine of merger governs this matter, and the court's order to reform the 1998 deed must be reversed. For the following reasons, we conclude relief is due.

         Our review of the court's decision to allow reformation of the 1998 deed implicates the following principles:

[T]he Orphans' [c]ourt is a court of equity, [which means] that in the exercise of its limited jurisdiction conferred entirely by statute, it applies the rules and principles of equity. In equity matters, [w]e must accept the trial court's finding of fact, and cannot reverse the trial court's determination absent a clear abuse of discretion or error of law. The trial court's conclusions of law, however, are not binding on an appellate court because it is the appellate court's duty to determine if the trial court correctly applied the law to the facts of the case. If a decision of the Orphans' ...

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