Sharon Steckbeck, et al., v. Colleen Steckbeck, et al.

Sharon Steckbeck, et al., v. Colleen Steckbeck, et al.

Civil Action-Business Law-Distribution-Partnership Assets-Death of Party-Statute of Frauds-Verbal Creation of Partnership-Uniform Partnership Act-Disassociated Partner-Dead Man’s Act-Exceptions

In this complicated case regarding distribution of assets following the deaths of different family members that some family members assert are controlled by oral agreements including an oral partnership agreement, the Court considered Motions for Partial Summary Judgment and Motions in Limine resolving whether admissibility of a verbal agreement was barred by the Statute of Frauds, enforcement of any agreement is barred by the Uniform Partnership Act and assertion of the existence of a verbal agreement is barred by the Dead Man’s Rule.

1.  The Statute of Frauds is not a rule of evidence and instead is a rule of public policy.

2.  The Statute of Frauds renders oral contracts pertaining to real estate to be unenforceable, but not invalid, and possibly may form the basis of an action to recover monetary damages. 

3.  Partnerships may be created verbally. 

4.  While agreements relating to a vested interest in real estate must be in writing, an agreement to share in profits generated by real estate are not subject to the Statute of Frauds. 

5.  Decisions pertaining to the Statute of Frauds are fact specific. 

6.  Under the Uniform Partnership Act, 15 Pa.C.S. § 8611 et seq., when an individual is disassociated as a partner, that individual no longer may participate in the management of the partnership and any interest possessed by the disassociated individual is owned by the individual solely as a transferee.

7.  An individual is disassociated as a partner when the individual dies. 

8.  A disassociated partner is entitled to be compensated for that partner’s share of the partnership value.

9.  The issues of whether the Statute of Frauds bars admission of evidence pertaining to creation of the partnership and distribution of profits and a party is entitled to compensation upon disassociation under the Uniform Partnership Act will be resolved at trial after hearing the facts of the case.

10.  The Dead Man’s Act is an exception to the general rule of evidence that no interest of policy or law shall make any person incompetent as a witness.

11.  The purpose of the Dead Man’s Act is to prevent injustice that would result from permitting a surviving party to a transaction to testify favorably to that party’s interest and adversely to the interest of the deceased.

12.  Title 42 Pa.C.S. §5930 indicates that the Dead Man’s Act applies when: (1) any party to a thing or contract in action is dead; (2) the deceased had an actual right or interest in the matter during his or her lifetime; (3) the rights of the deceased have passed to a party on record who represents his or her interest in the subject of the controversy; and (4) there is a surviving party or any other person whose interest is adverse to the right of the deceased that offers testimony to relevant matters that occurred prior to the death of the deceased.

13.  Under the Dead Man’s Act, surviving parties who have an interest that is adverse to the decedent’s estate are disqualified from testifying as to any transaction or event that occurred before the decedent’s death.

14.  Only those with a direct and immediate adverse interest in the outcome of litigation can be affected by the Dead Man’s Act. 

15.  To be affected by the Dead Man’s Act, the witness must have an adverse interest at the time he or she is called to testify and not at some prior time. 

16.  Section 5930 provides that when the inquiry involves property owned as a partner by the deceased and the dispute includes disposition of that property, all persons fully are competent witnesses. 

17.  Based upon the exceptions to the Dead Man’s Act, the Dead Man’s Act will not preclude at trial admission of evidence regarding whether a verbal partnership agreement was created and its terms. 

L.C.C.C.P. No. 2020-00720, Opinion by Bradford H. Charles, Judge, February 16, 2024.

IN THE COURT OF COMMON PLEAS OF LEBANON COUNTY

PENNSYLVANIA

CIVIL ACTION – LAW

SHARON STECKBECK, ET AL,               :

Plaintiff                                                      :

                                                                   :

          v.                                                       :        2020-00720

                                                                   :

COLLEEN STECKBECK, ET AL,             :

Defendant                                                  :       

                                                                   :

                                                ORDER OF COURT

          AND NOW, this 16^th day of February 2024, in accordance with the attached Opinion, the Order of this Court is as follows:

1. The Plaintiff’s Motion for Summary Judgment based upon the Statute of Frauds is DENIED without prejudice to the ability of the Plaintiff to re-submit her arguments following trial.
2. Plaintiff’s Motion for Summary Judgment based upon the Uniform Partnership Act is DENIED without prejudice to the ability of the Plaintiff to re-submit her arguments following trial.
3. Plaintiff’s arguments based upon the Dead Man’s Rule are DENIED.
4. Trial will occur as previously scheduled on April 4, 2024.

BY THE COURT,

                                                          ______________________________, J.

                                                          BRADFORD H. CHARLES

BHC/pmd

cc:     Court Administration

Timothy Huber, Esq.// 515 West Chestnut St., Lancaster PA 17603

          Timothy Engler, Esq.// 36 West Main Ave., Myerstown PA 17067

IN THE COURT OF COMMON PLEAS OF LEBANON COUNTY

PENNSYLVANIA

CIVIL ACTION – LAW

SHARON STECKBECK, ET AL,               :

Plaintiff                                                      :

                                                                   :

          v.                                                       :        2020-00720

                                                                   :

COLLEEN STECKBECK, ET AL,             :

Defendant                                                  :       

                                                                   :

APPEARANCES:

TIMOTHY HUBER, ESQ.                                    FOR Plaintiff

TIMOTHY ENGLER, ESQ.                                  FOR Defendant

Opinion, Charles, J., February 16, 2024

          This case would make an excellent Law School examination.  It implicates a Statute that was created before 1800, another Statute that was enacted in 2016 and may or may not have retroactive applicability, an antiquated concept – the Dead Man’s Rule – that courts have found more ways to avoid than to follow, and procedural rules that prohibit courts from granting relief except in the “clearest of cases.”  The parties should consider this Opinion to be our “mid-term” essay regarding the complicated legal questions they have presented.  For reasons we will articulate in more detail below, we reserve our “final” essay until after we have received more information via a trial.

I.        FACTUAL BACKGROUND

           The factual background of this case is beyond complicated.  It took over an hour during oral argument for the parties to educate the Court about the unparalleled sequence of events that has led us where we are today.  Before we proceed with a chronology of events, we will create a “roster” of sorts that will be helpful to an understanding of what occurred.

• Charles Steckbeck, Sr. (FATHER) – The patriarch of the Steckbeck family who passed away in 1999.
• Charles Steckbeck, II (CHARLES) – One of FATHER’s sons and the decedent of the Estate that is Plaintiff in this case.  CHARLES passed away in 2018.
• Sharon Steckbeck (SHARON) – Administratrix of CHARLES’ Estate.
• Colleen Steckbeck (COLLEEN) – Was the ex-wife of FATHER at the time of his death.  COLLEEN is the mother of FATHER’s five (5) children.  She also served as Administratrix of FATHER’s Estate.
• Jeffrey Steckbeck (JEFFREY) – One of FATHER’s sons who died in 2008.
• Joy Steckbeck Nagarkar, Janice Steckbeck and Julie Steckbeck Clingan (SIBLINGS) – Additional children of FATHER.
• Ryan Nagarkar, Kyle Nagarkar, Alexander Costello, Sonya Torres, Syrena Torres and Zoe Steckbeck (GRANDCHILDREN) – Grandchildren of FATHER.
• Kevin Richards, Esquire (AUDITOR) – An Orphan’s Court appointed AUDITOR who assessed issues pertaining to FATHER’s Estate.

When FATHER died in 1999, he owned several parcels of real estate.  Most notable was an apartment complex located in North Annville Township.  All of FATHER’s real estate, including the apartment complex, entered FATHER’s Estate.  FATHER’s will called for the Estate to be divided into six (6) shares.  CHARLES, JEFFREY and SIBLINGS each received one (1) share.  All of FATHER’s GRANDCHILDREN collectively received the remaining one-sixth share. 

Even though COLLEEN was divorced from FATHER at the time of his death, the entire family prevailed upon COLLEEN to serve as the Administratrix of the Estate.  She agreed.  In addition to “managing” the Estate – and we use that term loosely – COLLEEN also was responsible for maintaining and managing the Steckbeck Apartments. 

Prior to 2003, financial records pertaining to the Steckbeck Apartments listed the apartments as being property of FATHER’s Estate.  In 2003, all reference to FATHER’s Estate vanished from records pertaining to the Steckbeck Apartments.  Defendants claim that COLLEEN, CHARLES, JEFFREY and SIBLINGS all agreed to create a partnership to govern operations of the Steckbeck Apartments.  Whether, and to what extent, this occurred is an issue that is hotly contested by the parties. 

Little is known about the creation of the Steckbeck Apartments partnership.  Everyone agrees that no written contract or partnership agreement was ever entered into by anyone in the Steckbeck family.  Everyone also agrees that no tax returns or other documents evidencing a partnership were filed with governmental entities until 2011.  Moreover, no depositions of any partnership members were conducted, in part because of concerns that such depositions would act as a waiver of the Dead Man’s Rule upon which SHARON now seeks to rely.  Therefore, we know nothing about when, where and how the partnership agreement was entered into, nor do we even know all of the specific terms of the partnership agreement. 

In 2008, JEFFREY died.  Every year leading up to 2008, JEFFREY had received roughly 16% of the profits from the Steckbeck Apartments.  When JEFFREY died, COLLEEN was appointed as Administratrix of his Estate.  After JEFFREY’s death, his Estate received no further payments from the profits earned by the Steckbeck Apartments.  As Administratrix of JEFFREY’s Estate, COLLEEN did not assert a claim for profits, nor did she object when the Estate was omitted from annual profit distributions.  As we understand it, COLLEEN was also 100% beneficiary of JEFFREY’s Estate, so she would have benefited directly had funds from the Steckbeck Apartments flowed into JEFFREY’s Estate. 

Following JEFFREY’s death, his share of the profits generated by the Steckbeck Apartments was divided equally among all remaining living siblings.  Even though GRANDCHILDREN were afforded a one-sixth share of FATHER’s Estate, they did not receive any increase in percentage of profit distribution.  Nothing exists in the record to reflect that GRANDCHILDREN agreed to this modified profit distribution scheme, nor is there any evidence that GRANDCHILDREN even realized what was happening.  Regardless, after 2008, CHARLES and SIBLINGS all began receiving 20.8% of the profits generated by the Steckbeck Apartments.  It is unclear whether GRANDCHILDREN received anything, but we assume they collectively received 16.8%.[1] 

In 2018, CHARLES died.  SHARON was named as his Administratrix.  Beginning in 2019, CHARLES’ percentage of profits from the Steckbeck Apartments was equally distributed among SIBLINGS.  CHARLES’ Estate was given nothing.  SHARON disagreed with this result and litigation ensued. 

Initially, the parties’ dispute proceeded under the umbrella of Lebanon County Orphan’s Court.  This occurred because FATHER’s Estate had never been finalized.[2]  Under the Orphan’s Court docket, SHARON challenged the existence of the purported partnership related to the Steckbeck Apartments.  AUDITOR was appointed by the Court to resolve the issue.  After receiving testimony and evidence, AUDITOR issued a report on August 1, 2022.  Among other things, AUDITOR’s report concluded that a partnership did in fact exist related to the Steckbeck Apartments, that the deed to the Steckbeck Apartments was never transferred to the partnership due to an oversight, and that assets of the partnership should be divided in another venue.  AUDITOR did not reach any conclusion about whether SHARON should receive any portion of the partnership profits.[3] 

On June 12, 2020, SHARON initiated the above-referenced litigation via a Writ of Summons.  A Complaint was filed on August 12, 2023, setting forth causes of action for Breach of Contract, a violation of the Uniform Partnership Act, Conversion and Breach of Fiduciary Duty.  Objections were filed by the Defendants, claiming that AUDITOR’s report conclusively adjudicated all issues between the parties.  After extensive legal maneuvering, on January 19, 2023, this Court entered an Order that denied the Defendants’ Preliminary Objections.  Among other things, our opinion reached the conclusion that AUDITOR’s report was silent as it related to whether SHARON should be entitled to share in the benefits of the Steckbeck Apartments: “We cannot and will not abdicate jurisdiction based upon an Auditor’s report that effectively invited us to entertain this dispute.” (Slip Opinion at Page 10). 

An Answer has been filed by the Defendants.  According to that Answer, the original verbal partnership agreement provided that when a partner died, that partner’s Estate should not be entitled to any further profits generated by the Steckbeck Apartments.  Effectively, the Defendants claim that everyone agreed back in 2002-2003 that when one of the partners died, the Estate of that partner would forfeit any further benefits from the Steckbeck Apartments and that those benefits would be divided equally among all other partners. 

No written document memorializes the verbal agreement relied upon by the Defendants.  However, both parties assert that corroborating evidence exists regarding the existence of an agreement, or lack thereof.  Plaintiff points out that no partnership agreement exists, nor were tax returns filed by the partnership until 2011.  Plaintiff also argues that the intentional exclusion of GRANDCHILDREN from entitlement to increased percentages of profits is inconsistent with the assertion of Defendants that the parties originally agreed to equally divide a deceased partner’s shares among all other beneficiaries. (See, Paragraph 32 of Answer).  On the other hand, the Defendants point out that everyone involved, including CHARLES, received the benefit of an increased share of profits following JEFFREY’s death in 2008, and this practice corroborates the existence of an agreement as alleged by the Defendants.  In addition, the Defendants point to financial records that existed in 2002 and 2003.  The records in 2002 reflected that profits were to be distributed through the Estate.  Records in 2003 and subsequent thereto reflected that profits were to be distributed by “Steckbeck Apartments”. 

Before us today are various Motions that have been styled as Motions in Limine and Motions for Partial Summary Judgment.  Effectively, the Motions submit three (3) issues for our consideration:

• Whether admissibility of any verbal agreement is barred by the Statute of Frauds;
• Whether enforcement of any agreement asserted by the Defendants is barred by the Uniform Partnership Act; and
• Whether assertion of the existence of a verbal agreement is barred by the Dead Man’s Rule.

We will address each of these three issues seriatim.

II.       STANDARD FOR SUMMARY JUDGMENT

          PA.R.C.P. 1035.2 governs Motions for Summary Judgment in Pennsylvania.  That Rule provides that Summary Judgment may be entered when there is no genuine issue of any material fact as to any necessary element of a cause of action.  Pa.R.C.P. 1035.2.  The purpose of a Motion for Summary Judgment is to “avoid a useless trial.”  Coleman v. Wyeth Pharmaceuticals, Inc., 6 A.3d 502, 509 (Pa. Super. 2010). 

          To defeat a Motion for Summary Judgment, the non-moving party must come forth with evidence to establish the existence of a material issue of fact pertaining to the cause of action.  Pa. R.C.P. 1035.2, explanatory note.  The record presented must be viewed in the light most favorable to the non-moving party and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party.  Reliance Insurance Company v. IRPC Inc., 904 A.2d 912 (Pa. Super. 2006).  “Only when the facts are so clear that reasonable minds cannot differ may a trial court properly enter Summary Judgment.”  Reliance Insurance Company, supra at page 915.  On the other hand, Summary Judgment can be employed to weed out suspect legal claims for which there is a “substantive deficiency of proof”.  See, Grandelli v. Methodist Hospital, 777 A.2d 1138 (Pa. Super. 2001). 

III.      STATUTE OF FRAUDS

          Pennsylvania’s Statute of Frauds is one of the oldest laws on the so-called books.  It was created in March of 1772.  It states, in pertinent part:

“…all leases, estates, interests either of freehold or term of years, or any uncertain interest of, in, or out of any messuages, manors, lands, tenements or hereditaments shall…be assigned, granted or surrendered, unless it be by deed or note, in writing, signed by the party so assigning, granting or surrendering the same…”

33 P.S. § 1.

The Statute of Frauds was described by our Superior Court as follows:

“The Statute of Frauds is not a Rule of Evidence, but a declaration of public policy.  The purpose of the Statute of Frauds is to prevent the possibility of enforcing unfounded, fraudulent claims by requiring that contracts pertaining to interest in real estate be supported by written evidence signed by the party creating the interest.  It is satisfied by the existence of a written memorandum signed by the party to be charged and sufficiently indicating the terms of the oral agreement so that there is not serious possibility of consummating fraud by its enforcement.”

Burns v. Baumgardner, 449 A.2d 590, 594 (Pa. Super. 1982).

          The Statute of Frauds renders oral contracts pertaining to real estate unenforceable, but not invalid.  See, In RE: Scheffler, 471 B.R. 464 (E.D. Pa. 2012).  Our Appellate Courts have recognized that oral agreements pertaining to real estate will not be generally enforceable, but they could possibly form the basis of an action to recover monetary damages.  See, Hostetter v. Hoover, 547 A.2d 1247 (Pa. Super. 1988).  An oft-cited case characterizes the Statute of Frauds as a “shield and not a sword” in that it was created to “prevent frauds, and not encourage them.” Empire Properties Inc. v. Equireal Inc., 674 A.2d 297 (Pa. Super. 1996).  See also, Fannin v. Cratty, 480 A.2d 1056 (Pa. Super. 1984).

          As it relates to the facts of this case, the Defendants’ arguments implicate oral agreements.  The first created a partnership to manage the Steckbeck Apartments.  The second was that the partners are alleged to have agreed to extinguish any deceased sibling’s ability to share in profits from the Steckbeck Apartments.  Unfortunately, precedent involving verbal real estate partnership agreements to divide profits from real estate is not completely clear. 

          As it relates to partnerships pertaining to real estate, the Superior Court stated in 1931:

“The rule in Pennsylvania seems to be that where one owning land agrees to admit another into partnership in respect to that land, such an agreement is within the Statute of Frauds and therefore must be evidenced by writing.  As to the mere creation of a partnership to deal in land in the future, a writing is not always necessary, but usually an agreement to form a partnership with respect to land one already owns is within the Statute of Frauds.”

Stockdale v. Sellers, 157 A. 30 (Pa. Super. 1931).

This principle is consistent with the generally recognized rule that partnerships can be created verbally.  See, e.g. Miller v. Miller, 88 A.2d 784 (Pa. 1952).  In DeMarchis v. D’Amico, 637 A.2d 1029 (Pa. Super. 1994), evidence established that the parties entered into a verbal agreement to operate an automotive service center and divide profits equally “in lieu of rent” for real estate on which the business was located.  During the term of the business, the “partners” undertook real estate transactions and divided profits.  When the relationship between the parties soured, one challenged the existence of the partnership.  The Superior Court relatively quickly rejected this argument and stated:

“Appellant’s first argument is that the trial court erred as a matter of law in concluding that they did not have a partnership interest in the automotive repair business.  A question as to whether a partnership exists must be determined by reference to the parties’ intent.  As Appellant’s note, this Court has stated that: ‘It is entrenched in the law of the Commonwealth that the existence of a partnership depends upon the intentions of the parties as to being partners and that no formal or written agreement need be executed in order for a valid partnership to exist.  As the Pennsylvania Supreme Court…opined: ‘There is no requirement that partnership agreements be in writing.  They may be made orally or may be found to exist by implication from all attending circumstances…’’”

DeMarchis v. D’Amico, 637 A.2d 1029, 1033 (Pa. Super. 1994), quoting in part Barbet v. Ostovar, 417 A.2d 636, 641 (Pa. Super. 1979).

As it relates to distribution of profits related to real estate, the Superior Court has distinguished between verbal agreements pertaining to vested interests in real estate and verbal agreements to share in profits generated by the real estate.  In Knauer v. Knauer, 470 A.2d 553 (Pa. Super. 1983), the Court stated:

“It is well settled that the purpose of the Statute of Frauds is to prevent assertion of verbal understandings in the creation of interest or estates in land and to obviate the opportunity for fraud and perjury regarding said estates. 

At issue in the instant case, however, is not title to real estate but is an agreement to share in the accumulated wealth accrued during the pendency of the parties’ cohabitation.  While part of this accumulated wealth consists of profits from the sale of real estate, the court’s division of these profits does not violate the Statute of Frauds.  Oral agreements to share in profits from the sale of real estate can be enforced after the realty has been sold.”

Id at page 565. 

See also, Benjamin v. Zell, 100 Pa. 33 (Pa. 1882). (“An interest in contingent profits, arising from a sale of real estate, to be made thereafter, does not amount to an interest in the land itself, within the meaning of the Statute of Frauds.”)  On the other hand, in Davis v. Hillman, 135 A. 254 (Pa. 1926), the Superior Court declared that verbal understandings about how appreciation of real estate should be divided were unenforceable due to the Statute of Frauds.  Similarly, in Redditt v. Horn, 64 A.2d 809 (Pa. 1949), the Court applied the Statute of Frauds to a purported agreement between the parties that called for equal division of profits derived from the sale of real estate. 

          Both parties have cited the more recent case of St. John Mortgage Company v. Unites States Fidelity and Guarantee Company, 897 F.2d 1266 (3^rdCir. 1990).  That case, like the one at bar, involved a Motion for Summary Judgement based upon the Statute of Frauds.  According to the Plaintiff, the parties reached an oral agreement pertaining to real estate investment and financing.  The parties agreed that they had entered into discussions whereby the defendant would lend 12 million dollars to the plaintiff in order to purchase fifteen (15) parcels of real estate and money would be repaid over a ten (10) year period of time.  The Court stated: “While the parties agree on these basic terms of the deal, they dispute the outcome of the [meeting].  St. John claims that [defendant agreed] to enter into the proposed agreement.  [Defendant] contends that no agreement was reached.” Id at page 1268.          

          The trial court declared that the purported oral agreement was invalid because of the Statute of Frauds.  On Appeal, the Third Circuit Court of Appeals reversed.  The Third Circuit distinguished between loans and sales pertaining to real estate.  The Court determined that genuine issues of material fact existed “as to whether the alleged agreement was a loan or a sale.”  The Court determined that the latter would be governed by the Statute of Frauds, but the former would not.  The Court concluded that “there is no Pennsylvania precedent supporting application of the real estate Statute of Frauds to bar enforcement of the proposed transaction.”  Id at page 1271.         

          Where does all of the above leave us as it relates to the facts of this case?  Sadly, the answer to this question is…confused.  By its very title, the partnership sought to be enforced by Defendants – “Steckbeck Apartments” – relates exclusively to real estate.  Moreover, all of the profits that are at issue were derived from rental income generated by the real estate.  It is viscerally appealing to declare that partnerships and rents related exclusively to real estate should be memorialized in some sort of written form.  Yet there is language in the cases outlined above that partnerships can be created verbally and at least some agreements pertaining to real estate profits need not be in writing. 

          Ultimately, it seems as though decisions pertaining to the Statute of Frauds are fact-specific.  In fact, sometimes details found in the factual record are determinative.  One thing that is clear is that the Statute of Frauds is not a rule of evidence.  Thus, nothing requires us to rule on a Statute of Frauds issue prior to a trial. 

          In this case, details about what the purported agreement was, when it was entered into and how are noticeably absent from the record.  None of the individuals who will purportedly confirm the existence of a verbal agreement were deposed.  None of those same participants submitted affidavits to be considered with respect to this Motion for Summary Judgment.  We know broad generalities about what the parties allege to have happened.  Based on all of the confusing decisional precedent outlined above, we are not comfortable issuing a dispositive ruling based upon broad generalities.  

          We will listen at trial to all of the evidence presented.  To the extent that Plaintiff wishes to preclude the admissibility of any evidence pertaining to creation of the partnership or distribution of profits, thereafter, said objection will be overruled.  We will listen to everything presented regarding alleged oral agreements before we render any decision regarding Plaintiff’s Statute of Frauds argument.  For today, we will simply deny Plaintiffs’ Motion for Summary Judgment and Motion in Limine predicated upon the Statute of Frauds.  

IV.     UNIFORM PARTNERSHIP ACT    
          In 2016, Pennsylvania enacted the Pennsylvania Uniform Partnership Act of 2016 (hereafter “the Act”).  The Act did more than simply codify existing common law principles; it created a comprehensive set of rules governing partnerships.  In particular, the Act includes provisions regarding dissolution of a partnership and disassociation by a partner.  See, 15 Pa.C.S.A. §8481; 15 Pa.C.S.A. §8471.  Under the Act, when an individual is “disassociated as a partner”, he or she can no longer participate in the management of the partnership, and any interest possessed by the disassociated individual “is owned by the person solely as a transferee.”  15 Pa.C.S.A. §8463(b).  Under the Act, an individual is disassociated as a partner when “the individual dies”.  15 Pa.C.S.A. §8461(7)(i).  In a preliminary provision of the Act, a provision relating to partnership agreements specifically prohibits a partnership agreement from varying the ability of a person to disassociate with the partnership.  15 Pa.C.S.A. §8415(c)(14).  When “disassociation” occurs, the disassociated partner, or his/her estate, is entitled to be compensated for his/her share of the partnership value.  15 Pa.C.S.A. §8471(b).[4] 

          Because of its relatively recent enactment, few cases exist to interpret the 2016 Uniform Partnership Act.  However, the official comments to the Statute do provide some guidance.  As it relates to disassociation, the official comment to §8461 states: “This Section states default rules that may be varied by the partnership agreement.  However, it would be nonsensical to vary some of the rules – e.g., to provide that death does not cause an individual’s disassociation…”. See,15 Pa.C.S.A. §8461 (official comment).  Similarly, the official comment to §8471 states:

“This subchapter provides for the buyout of a disassociated partner’s interest in the partnership when the partner’s disassociation does not resolve in a dissolution…If there is no dissolution, the remaining partners have a right to continue the business and the disassociated partner has a right to be paid the value of his partnership interest.  These rights can, of course, be varied in the partnership agreement…

The rules in the section are merely default rules.  The partners may, in the partnership agreement, fix the method or formula for determining the buyout price and all of the other terms and conditions of the buyout right.  Indeed, the very right to a buyout itself may be modified, although a provision providing for complete forfeiture would probably not be enforceable.”

15 Pa.C.S.A. §8471 (official comment).

          Plaintiff argues that she is clearly entitled to the benefits of a “disassociated partner”, effective on the date of CHARLES’ death.  Plaintiff posits that “no partnership agreement may alter the right of a partner to disassociate.” Defendants respond by pointing out that a partnership agreement can supersede the terms of the Act.  Citing the official comments, Defendants argue: “The sections of the Act simply set forth ‘default rules’ that may be varied by the partnership agreement.  The partners may, in the partnership agreement, fix the terms and conditions of the buyout right and the very right to a buyout itself may be modified.” 

          Without question, the Uniform Partnership Act of 2016 supports Plaintiff’s theory of entitlement to compensation.  Moreover, the terms of the Statute itself are inconsistent with Defendants’ theory that one partner’s share of a partnership’s value should automatically be passed to certain other partners.  In a vacuum, the Uniform Partnership Act of 2016 appears to support Plaintiff’s request for Summary Judgment. 

          There are several considerations that prevent us from simply pulling the trigger on a grant of Summary Judgment for the Plaintiff.  At the risk of “thinking out loud”, we will list the factors that give us significant pause:

• The “official comment” to the Act clearly indicates that partnership agreements can vary the terms of the Act. 
• If a partnership exists as alleged by Defendants, the partnership was created well before the Uniform Partnership Act of 2016 was enacted.  Moreover, while CHARLES died after the Act took effect, the deaths of FATHER and JEFFREY occurred well before the Act became law.  Generally speaking, substantive changes in the law are not given retroactive effect.  See, e.g., 1 Pa.C.S.A. §1926; Sugar Grove Township v. Byler, 191 A.3d 84 (Pa. Cmwlth. 2018).[5]
• Partnerships can be created orally without the necessity of a written document.  See, e.g., 15 Pa.C.S.A. §8412 (definition of Partnership agreement includes “oral” agreements); Pappas v. Klutinoty, 118 A.2d 202 (Pa. 1955).
• For ten years after JEFFFREY died, CHARLES received without complaint a portion of his deceased brother’s share of the profits generated by the Steckbeck Apartments.  Does this implicate an estoppel argument?

On the other hand, and also at the risk of continuing to “think out loud”, we have also considered the following:

• Although the official comment to the Act clearly references the possibility that a partnership agreement could supersede a provision of the Act, the comment also refers to an arrangement that would eliminate death as an event triggering disassociation as “nonsensical”.  Thus, the Act envisioned that there would be certain provisions of a partnership agreement that would not be permitted to supersede provisions of the Act. 
• Although the Act does envision verbal partnership agreements, a fair reading of the Act reveals that the framers contemplated that the partnership agreement would be a written document. See, e.g., 15 Pa.C.S.A. §8417, where the Act requires documents evidencing the partnership to be filed with a governmental department, especially if the agreement conflicts with the Act.  See also, comment to 15 Pa.C.S.A. §8415.
• A predecessor to the Uniform Partnership Act of 2016 existed.  See, e.g., 15 P.S. §8501.  The parties did not provide arguments regarding relevant provisions, if any, of the predecessor act.
• Common law principles that preceded the Act support Plaintiff’s position that when a partner dies, his/her estate is entitled to be compensated for the deceased partner’s share of the partnership’s value. See, e.g., Ellis v Ellis, 203 A.2d 547 (Pa. 1964); Girard Bank v. Haley, 332 A.2d 443 (Pa. 1975).

Given the competing considerations outlined above, we are simply not comfortable affording dispositive relief to the Plaintiff via a Motion for Summary Judgment.  As we articulated with respect to the Statute of Frauds, the record in this case is devoid of specific information regarding details of the purported partnership agreement upon which the Defendants rely.  As we did with respect to the Statute of Frauds, we will punt a decision regarding the Act and will allow the parties to present arguments regarding the applicability of the Act once factual meat is placed on the skeleton of the parties’ arguments.  For today, we will deny Plaintiff’s Motion for Summary Judgment.

V.      DEAD MAN’S ACT

The Dead Man’s Act is an exception to the general rule of evidence that no interest or policy of law shall make any person incompetent as a witness.  Larkin v. Metz, 580 A.2d 1150, 1152 (Pa.Super. 1990), citing 42 Pa.C.S.A. § 5921.  The purpose of the Dead Man’s Act is to prevent the injustice that would result from permitting a surviving party to a transaction to testify favorably to himself/herself and adversely to the interest of the deceased. “The theory is that because the decedent’s representative is unable to present evidence regarding the transaction, the other party to the transaction should be similarly restricted.” Visscher v. O’Brien, 418 A.2d 454, 458 (Pa. Super. 1980) (citation omitted). See also: Estate of Kofsky, 409 A.2d 1358, 1359 (Pa. 1979). 

The parameters for allowing testimony from a surviving party in a civil action are set forth in 42 Pa.C.S.A. § 5930 (hereafter “§ 5930”).  Officially titled, “Surviving party as witness, in the case of death, mental capacity, etc.”, § 5930 is also referred to as the “Dead Man’s Act”. The Dead Man’s Act applies when:

1) any party to a thing or contract in action is dead;

2) and the deceased had an actual right or interest in the matter during his/her lifetime; 

3) and his/her rights have passed, by his/her own act or by an act of law, to a party on record who represents his/her interest in the subject in controversy; and

4) there is a surviving party or any other person whose interest is adverse to the right of the deceased, that offers testimony to relevant matters that occurred prior to the death of the deceased. 

In such matters, the surviving party is an incompetent witness, and may not testify to any relevant matter occurring before the death of the other party.  In other words, “surviving parties who have an interest which is adverse to decedent’s estate are disqualified from testifying as to any transaction or event which occurred before decedent’s death.” Hera v. McCormick, 625 A.2d 682, 688 (Pa. Super. 1993), citing Matthew’s Estate, 246 A.2d 412 (Pa. 1968).

          While the Dead Man’s Rule is relatively easy to explain, in practice it has been far more difficult to apply.  The Honorable Mark I. Bernstein wrote in his respected treatise: “No evidentiary rule is more difficult to apply than the Dead Man’s Rule.”  Bernstein, Pennsylvania Rules of Evidence § 601[9] (2018).  Indeed, it often appears as though the many exceptions that courts have created to the Dead Man’s Rule have effectively neutered it. 

          One way that courts have avoided the impact of the Dead Man’s Rule is through the so-called “adverse interest” test.  Only those with a “direct and immediate adverse interest” in the outcome of litigation can be affected by the Dead Man’s Rule.  In Re: Fiedler, 132 A.3d 1010, 1025 (Pa. Super. 2016).  The fact that a witness may be unfriendly to the deceased’s cause and partial to that of the survivor implicates credibility but does not affect competency under the Dead Man’s Rule.  Billow v. Billow, 61 A.2d 817 (Pa. 1948).  Moreover, to be affected by the Dead Man’s Rule, the witness must have an adverse interest at the time he is called to testify, and not some prior time.  Clancy v. Recker, 316 A.2d 898 (Pa. 1974).  Stated simply, the adverse interest must directly and contemporaneously affect the witness. In Re: Gelb’s Estate, 228 A.2d 367 (Pa. 1967). 

          Another exception to the Dead Man’s Rule is found in § 5930 itself.  The Statute provides that when the inquiry involves property owned as a partner by the deceased, and the dispute includes disposition of said property, all persons are fully competent witnesses.  The purpose of this exception is to help courts reach well-informed determinations of how a decedent’s property should be disposed of in accordance with his/her wishes.  This exception reasons that even while reported beneficiaries may be adverse to each other, they are not really adverse to the interest of the decedent’s estate: “Where…intent is the very thing which is at issue, we would be needlessly blindfolding the eyes of the law were we to close the mouths of those who are in the best position to shed light on the issue.” In Re: McClain’s Estate, 392 A.2d 1371, 1375-76 (Pa. Super. 1978). 

          A related but separately-defined exception to the Dead Man’s Rule is called devisavit vel non.  This exception provides that witnesses are competent to testify in disputes arising over the passage of property, through will or intestacy.  This exception applies to disputes involving the transfer of a deceased’s estate both by operation of law or by will and renders competent all witnesses claiming a deceased’s property by reason of his/her death.  In Re: Estate of Janosky, 827 A.2d 512, 516 (Pa. Super. 2003). 

          Another exception to the Dead Man’s Rule is predicated upon 42 Pa.C.S.A. § 5933.  Under this exception, a surviving party to a transaction with a decedent remains competent to testify for the purpose of contradicting matters attested to by living witnesses.  See, In Re: Estate of Cecchine, 485 A.2d 454 (Pa. Super. 1984).  Thus, if a transaction occurred between a decedent and another party that was witnessed by a third person who was called to testify, the living party to the transaction may nevertheless testify about what occurred. Commonwealth Trust v. Szabo, 138 A.2d 85 (Pa. 1957).  See also, In Re: Bowman’s Estate, 152 A.38 (Pa. 1930). 

          Yet another exception to the Dead Man’s Rule is predicated upon waiver.  In the case of Schroeder v. Jaquiss, 861 A.2d 885 (Pa. 2004), Pennsylvania’s Supreme Court stated:

“[W]hen a decedent before he died or a decedent’s representative has required an adverse party to be deposed or to answer interrogatories, any objection based upon the Dead Man’s Rule to the competency of such party to testify at the trial is waived, even though the discovery is not offered in evidence.”

Id at page 889.

The Supreme Court has even applied the doctrine of waiver in a case where a decedent’s representative provided an adverse party’s statement in a pre-trial conference.  See, Flagship First National Bank of Miami Beach v. Bloom, 431 A.2d 1082 (Pa. Super. 1981).  In Estate of Kofsky, 409 A.2d 1358 (Pa. 1979), our Supreme Court held that a personal representative waives the Dead Man’s Rule when he testifies on his own behalf about facts that occurred after the decedent’s death. 

We are confident that one or more of the exceptions outlined above are triggered by the unique facts of this case.  For example, SHARON and her attorney participated fully in the Court proceeding before AUDITOR.  This participation included cross-examination by SHARON’s lawyer of witnesses who spoke about the Steckbeck Apartments.  This participation certainly implicates the concept of waiver.  Moreover, to the extent that COLLEEN is called to testify, her mouth will not be closed because she does not have a direct interest adverse to SHARON.  Even though COLLEEN may be “friendly” to the Defendants, that alone does not create a direct adverse interest.  Moreover, testimony about a partnership by living partners is permissible notwithstanding the Dead Man’s Rule.  The sine qua non of this dispute involves the creation of a purported partnership and an agreement entered into by all partners. 

As simply as we can put it, this case should not be decided based upon the Dead Man’s Rule.  Ultimately, we will have to determine whether a verbal partnership agreement was entered into and what terms were included within it.  To render this decision, we will need to hear from the people who are alive and who purportedly participated in the formation of the partnership.  If we were to proverbially close the mouths of living witnesses, it would be impossible to determine the truth of what occurred.  The Dead Man’s Rule was not intended to create such a result.  For this reason, as well as all the others outlined above, we will reject Plaintiff’s arguments based upon the Dead Man’s Rule.

VI.     CONCLUSION

          The burden of establishing entitlement to Summary Judgment is upon the moving party.  Typically, this means that a party requesting Summary Judgment must present information and evidence sufficient to support the parties’ arguments.  In most cases, this takes the form of affidavits and deposition transcripts.  Here, we have neither. 

          We are instructed by Pennsylvania’s Rules of Civil Procedure that Summary Judgment should only be granted in the “clearest of cases” when there is “no doubt” about entitlement to relief.  See, Pa.R.C.P. Rule 1035.2(1); Pennsylvania Gas & Water Co. v. Nenna & Frain, Inc. v. Borough of Dickson City, 467 A.2d 330 (Pa. Super. 1983); Anderson v. Moore, 650 A.2d 1090 (Pa. Super. 1994).

          As it relates to the arguments presented to us today, we simply cannot declare that we have “no doubt” regarding the Plaintiff’s “clear” entitlement to relief.  Therefore, under the rules governing Summary Judgment, we are compelled to deny the Plaintiff’s request for dispositive relief. 

          With the above having been said, we need to also emphasize for the record that we have not completely foreclosed Plaintiff’s arguments based upon the Statute of Frauds and the Uniform Partnership Act.  While we have rejected Plaintiff’s arguments regarding the Dead Man’s Rule, we specifically reserve the ability to base a decision on the Statute of Frauds and/or the Uniform Partnership Act until after we are educated further by the parties about the facts and law governing this dispute.

          Of necessity, our decision today contemplates that both parties will be able to present testimony and evidence regarding the existence, or lack thereof, of a partnership agreement and of the nature and extent of any of its terms.  Thus, to the degree that Plaintiff has couched her arguments as a Motion in Limine, that Motion in Limine will be denied. 

          Effectively, our decision today sends the above-referenced matter forward to a trial.  Candidly, the record presented to us does not support any other decision.  The only issue we have adjudicated today involves Plaintiff’s reliance on the Dead Man’s Rule.  We simply will not adjudicate this dispute based upon a rule that is as antiquated and obtuse as the Dead’s Man’s Rule.[6] 

          A Court Order to accomplish all of the above will be entered today’s date. 

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[1] If the four living children each received 20.8%, an additional 16.8% would be needed to mathematically reach 100%.

[2] For twenty (20) years, the Estate had remained in limbo. 

[3] At page 11 of his report, AUDITOR lamented that the scope of the hearing had “taken a much wider scope than was authorized by Order of Court.”  The AUDITOR then declared: “This Report will be confined solely to activities pertaining to the Decedent’s Estate.”

[4] Interestingly, the “buyout price” when disassociation occurs is determined as of the date of disassociation and is based upon the liquidation value of the business or “the value based on the sale of the entire business as a going concern without the [disassociated] person.” See, 15 Pa.C.S.A.§8471(b). Ongoing profits after the date of disassociation are not specifically discussed in the Act.

[5] The parties did not Brief the issue of whether Plaintiff seeks retroactive application of the Uniform Partnership Act of 2016 or, if so, whether it can be applied retroactively under the facts of this case.  We are aware that this could be a complicated issue.  See, 15 Pa.C.S.A. § 8411 and Slomowitz v. Kessler, 268 A.3d 1081 (Pa. Super. 2021).  Given the nature of our decision today, we do not now need to reach a final conclusion about this issue.

[6] In this regard, we have added our voice today to the thousands of other jurists who have found ways to avoid application of the Dead Man’s Rule.