J-A12027-15

NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37

ANNE B. COVALESKY A/K/A ANNE B. 

KAVALIAUSKAS, INDIVIDUALLY AND 

AS EXECUTRIX OF THE ESTATE OF 

SYLVESTER COVALESKY A/K/A 

SYLVESTER E. KAVALIAUSKAS AND 

BERNARD COVALESKY,

:

:

:

:

:

:

IN THE SUPERIOR COURT OF

PENNSYLVANIA

:

Appellee :

:

v. :

:

RUTH COVALESKY AND PHILLIP 

COVALESKY,

:

:

:

:

Appellants : No. 340 MDA 2014

Appeal from the Order entered January 14, 2014,

Court of Common Pleas, Lackawanna County,

Civil Division at No. 60069 of 2003

BEFORE: BOWES, DONOHUE and ALLEN, JJ.

MEMORANDUM BY DONOHUE, J.: FILED JUNE 10, 2015

Appellants, Ruth Covalesky (“Ruth”) and Phillip Covalesky (“Phillip”) 

(collectively “Appellants”), appeal from the order entered on January 14, 

2014 by the Court of Common Pleas of Lackawanna County. For the reasons 

that follow, we affirm.

We summarize the relevant facts and procedural history underlying 

this appeal as follows. Sylvester Covalesky (“Sylvester”) and his brother 

Joseph Covalesky (“Joseph”) were the joint owners of approximately 

$450,000 worth of U.S. Savings Bonds (“bonds”). When Joseph died on 

March 7, 2001, Sylvester became the sole owners of the bonds. Prior to 
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Joseph’s death, Sylvester and Joseph’s sister, Anne Covalesky (“Anne”), 

gave the bonds to Ruth, who was Sylvester’s, Anne’s, and Joseph’s sister-inlaw,1

for safekeeping. At that time, Joseph was in the hospital, Anne was 

having surgery and would likewise be in the hospital, and Sylvester’s health 

was deteriorating following his diagnosis with Parkinson’s disease. The 

bonds remained in Ruth’s possession after Joseph’s death.

At some point in 2001, Sylvester executed a durable power of attorney 

appointing Anne as his attorney-in-fact and Ruth as Anne’s secondary 

successor. Ruth was to serve as Sylvester’s attorney-in-fact only if Anne 

was no longer competent to serve in that capacity. On August 7, 2003, after 

Ruth had taken Sylvester to the hospital, Ruth cashed Sylvester’s bonds and 

deposited the money in a joint account in her and Sylvester’s name, despite 

Anne being competent to serve as Sylvester’s attorney-in-fact at that time. 

On August 21, 2003, Sylvester executed a will bequeathing his entire 

estate to Anne, and in the event she pre-deceased him, to his nephew, 

Bernard Covalesky, Jr. (“Bernard”), Anne’s son. In that will, Sylvester also 

named Anne the executor of his estate.

In late August 2003, Attorney Douglas P. Thomas (“Attorney 

Thomas”), Anne’s lawyer, learned from PNC Bank that Ruth had liquidated 

Sylvester’s bonds and deposited the proceeds in Ruth and Sylvester’s joint 

 

1

 Ruth was the wife of Victor Covalesky (“Victor”). Victor predeceased 

Sylvester, Anne, and Joseph. 
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bank account. Anne was able to recover all of the roughly $450,000 worth 

of liquidated bond money and placed it into a bank account in her name. 

Anne testified that she spent all of the bond money, though it is unknown 

exactly how she spent it. N.T., 6/19/12, at 97. 

Because Ruth liquidated the bonds in 2003, Sylvester incurred 

approximately $320,480 worth of taxable income from the redeemed bonds, 

resulting in an $89,691 tax liability on his 2003 tax return. See N.T., 

6/20/12, at 254; Plaintiff’s Exhibit 6. Both parties agreed that the tax 

liability that resulted from Ruth’s liquidation of the bonds was $89,691. See

N.T., 6/20/12, at 254-55. 

Sylvester and Anne filed a complaint against Ruth and Phillip, Ruth’s 

son, on October 15, 2003. Sylvester subsequently died on October 30, 

2003. On January 7, 2005, Anne amended the complaint to add herself as 

the executor of Sylvester’s estate and to add Bernard as a party to the suit. 

In the complaint, Anne and Bernard sought, inter alia, damages for the tax 

liability Sylvester incurred resulting from Ruth liquidating his bonds. On 

June 19 and 20, 2012, the trial court held a nonjury trial on the case. 

Following trial, but prior to the trial court’s decision, Anne died on December 

28, 2012. On September 6, 2013, the trial court issued a nonjury decision 

pursuant to Rule 1038 of the Pennsylvania Rules of Civil Procedure finding, 

inter alia, that Ruth illegally and improperly liquidated Sylvester’s bonds 

because Ruth had no power to act as Sylvester’s power of attorney so long 
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as Anne was competent to do so. Nonjury Decision, 9/6/13, at 22-24. The 

trial court further found that because of Ruth’s conversion of the bonds, 

Sylvester incurred an $89,691 tax liability, which the court ordered 

Appellants to return to Sylvester’s estate. Id. at 24, 26.

On September 12, 2013, Appellants timely filed post-trial motions 

pursuant to Rule 227.1 of the Pennsylvania Rules of Civil Procedure. In their 

post-trial motions, Appellants argued that the trial court erred in determining 

the amount of damages that they owed Sylvester’s estate stemming from 

the liquidation of his bonds and the resulting tax liability. See Defendant’s 

Motion for Post-Trial Relief, 9/12/13, ¶¶ 36-50; N.T., 12/10/13, at 5. On 

January 10, 2014, the trial court denied Appellants’ post-trial motions. On 

February 6, 2014, Appellants filed a timely notice of appeal.

On appeal, Appellants raise the following four issues for our review and 

determination:

1. Whether the trial court committed an error of law 

and/or abuse of discretion by disregarding all of the 

expert’s testimony regarding tax liability related to 

the income from the bonds, including, but not limited 

to that based upon the trial court’s hypothetical 

question, when the expert’s testimony was the only 

testimony or evidence presented regarding income 

taxes associated with liquidating bonds. 

2. Whether the trial court committed an error of law 

and/or abuse of discretion by requiring Appellant[s] 

to return the entire $89,691.00 in tax loss for the 

income from the bonds to the Appellee[s] when 

[Anne] actually received and spent all bond income. 
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3. Whether the trial court committed an error of law 

and/or an abuse of discretion when it applied the 

increased risk of harm standard in an equity action 

where negligence was not claimed or established.

4. Whether the trial court committed an error of law 

and/or an abuse of discretion when it applied the 

unclean hands doctrine to the Appellants in this case 

and basing its decision requiring Appellant to 

reimburse the entire $89,691.00 tax loss, at least in 

part, on the misapplied doctrine.

Appellants’ Brief at 4.2

We begin by acknowledging our standard of review for a nonjury 

proceeding:

Our review in a non-jury case is limited to whether 

the findings of the trial court are supported by 

competent evidence and whether the trial court 

committed error in the application of law. We must 

grant the court’s findings of fact the same weight 

and effect as the verdict of a jury and, accordingly, 

may disturb the non-jury verdict only if the court’s 

findings are unsupported by competent evidence or 

the court committed legal error that affected the 

outcome of the trial. It is not the role of an 

appellate court to pass on the credibility of 

witnesses; hence we will not substitute our judgment 

for that of the fact[-]finder. Thus, the test we apply 

is not whether we would have reached the same 

result on the evidence presented, but rather, after 

due consideration of the evidence which the trial 

court found credible, whether the trial court could 

have reasonably reached its conclusion.

 

2

 We reordered the issues Appellants raise on appeal for ease of review.
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Agostinelli v. Edwards, 98 A.3d 695, 704 (Pa. Super. 2014) (quoting 

Lynn v. Pleasant Valley Country Club, 54 A.3d 915, 919 (Pa. Super. 

2012)).

For their first issue on appeal, Appellants argue that the trial court 

erred by disregarding the expert testimony of Paul Murphy (“Murphy”), a 

certified public accountant, regarding the tax liability associated with the 

liquidation of U.S. Savings Bonds. Id. at 11-18. Murphy testified that if 

Ruth had not cashed the bonds in August 2003 and they had remained in 

Sylvester’s estate when he died two months later in October 2003, there 

would have been two tax options. N.T., 6/20/12, at 240-41. The first 

option would have been for Sylvester’s estate to report the income upon 

redeeming the bonds and to pay the resulting tax. Id. The second option, 

and the one most people choose, would have been to pass the bonds along 

to Anne, the beneficiary of Sylvester’s estate, have her cash the bonds, and 

then she would have to report the income on her individual tax return and 

pay the tax. Id. at 241. Murphy stated that the second option creates the 

lesser tax burden because when the estate redeems the bonds and pays tax 

on them, that income is taxed in the highest tax bracket when the estate 

has $9,350.00 or more in income for the year. Id. at 241-42, 251. When 

the beneficiary redeems the bonds and pays the resulting tax liability, the 

income is taxed in the beneficiary’s tax bracket, and an individual does not 
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fall within the highest tax bracket until that person’s income reaches 

$311,950 for the year. Id. 

Murphy further testified, through a hypothetical question asked by the 

trial court, that if the bonds had not all been cashed in one year, the tax 

consequences would have been different. See id. at 248-49. The 

hypothetical questioning was as follows:

Q. Assume for purposes of discussion, I am going to 

give you a hypothetical, you have so many variables, 

to be honest with you, I am going to be the fact 

finder in this case and your testimony is not helping 

me.

A. Okay.

Q. So I am going to try to ask you a [hypothetical] 

and it may help.

A. Sure.

Q. Let’s assume, for purposes of my [hypothetical], 

that these bonds were not liquidated in August of the 

year of Sylvester’s death 2003 when he died in 

October of 2003.

So let’s assume that he dies in October and these 

bonds are as they originally were; could you have 

cashed half in 2003 and half in 2004 because the 

estate could be open for the calendar years, kept 

yourself below the [$311,000] [sic] made the pass 

through more tax advantageous to the recipients?

A. That’s correct.

Id. at 248-49.
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Based on the hypothetical question posed by the trial court, Murphy 

stated that the tax loss, assuming Anne fell in the same tax bracket as 

Sylvester, would have been less than the $89,691 Sylvester actually paid if 

Anne, as Sylvester’s beneficiary, had been able to cash the bonds over a 

two-year period following Sylvester’s death. See id. at 249-60. Murphy 

estimated the tax liability in that scenario to be $78,562, which was an 

$11,135 difference between what Sylvester actually paid as a result of Ruth 

improperly redeeming the bonds in August 2003 ($89,691) and what would 

have been paid if the bonds if Anne had been able to cash them over a twoyear period following Sylvester’s death. See id. at 259-60.

Because Sylvester died only two months after Ruth improperly 

redeemed his bonds, Appellants argue that they should only have to pay the 

difference between the $89,691 Sylvester actually owed and the amount 

Anne would have paid in taxes, assuming she would have redeemed the 

bonds over a two-year period following Sylvester’s death. See Appellants’ 

Brief at 11-18. Because Anne’s income from 2003 is unknown, and as a 

result, so is her tax bracket, Appellants ask us to vacate the portion of the 

trial court’s order requiring Appellants to return all of the $89,691 and 

remand the matter to the trial court to determine the actual income tax 

Anne would have incurred if she had redeemed the bonds over the course of 

a two-year period following Sylvester’s death. See id. at 13-14.
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The trial court found not credible the conclusion reached by Murphy as 

to how Sylvester’s bonds would have been taxed if they had been redeemed 

following his death. Final Decision and Order on All Motions for Post-Trial 

Relief, 1/14/14, at 10-11. The trial court explained:

[The] expert testimony by CPA Murphy is factually 

inadequate because his testimonial assumptions are 

unsupported by the evidence presented and found to 

be credible. Mr. Murphy speculated that either the 

estate or the beneficiary in receipt of the bonds 

would ultimately have had to pay taxes. He 

speculated that the flow through method directly to 

the beneficiary would be most economical but we are 

without guidance as to what that ultimate beneficiary 

tax bracket actually was. There is simply no 

evidence of record of the recipient’s tax bracket nor 

is there evidence of whether that receipt did take 

place over one year or two.

Id. We agree. 

“It is beyond argument that the fact-finder is free to accept or reject 

the credibility of both expert and lay witnesses, and to believe all, part or 

none of the evidence.” Brown v. Trinidad, 111 A.3d 765, 771-72 

(Pa. Super. 2015). Regarding expert testimony, our Supreme Court has 

held:

An expert cannot base his opinion upon facts which 

are not warranted by the record. No matter how 

skilled or experienced the witness may be, he will 

not be permitted to guess or to state a judgment 

based on mere conjecture. ... To endow opinion 

evidence with probative value it must be based on 

facts proven or assumed, sufficient to enable the 

expert to form an intelligent opinion. The opinion 

must be an intelligent and reasonable conclusion, 
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based on a given state of facts, and be such as 

reason and experience have shown to be a probable 

resulting consequence of the facts proved. The basis 

of the conclusion cannot be deduced or inferred from 

the conclusion itself. In other words, the opinion of 

the expert does not constitute proof of the existence 

of the facts necessary to support the opinion.

Collins v. Hand, 246 A.2d 398, 404 (Pa. 1968) (quotations and citations 

omitted). Thus,

expert testimony is incompetent if it lacks an 

adequate basis in fact. See Viener v. Jacobs, 834 

A.2d 546, 558 (Pa. Super. 2003). “While an expert’s 

opinion need not be based on absolute certainty, an 

opinion based on mere possibilities is not competent 

evidence. This means that expert testimony cannot 

be based solely upon conjecture or surmise.” Id.

Rather, “[an expert’s] assumptions must be based 

upon such facts as the [factfinder] would be 

warranted in finding from the evidence.” Id.

Helpin v. Trustees of Univ. of Pennsylvania, 969 A.2d 601, 617 (Pa. 

Super. 2009), aff’d, 10 A.3d 267 (Pa. 2010).

The trial court committed no abuse of discretion in determining that 

the conclusion Murphy reached through responding to the trial court’s 

hypothetical was speculative and unsupported by the record. Murphy’s 

conclusion was reliant on the assumption that Anne, once she received 

Sylvester’s bonds as his beneficiary, would have redeemed Sylvester’s bonds 

in two equal amounts in 2003 and 2004.3 Murphy’s conclusion did not 

 

3

 Appellants make a bald assertion that Sylvester’s bonds were nontransferable and that his estate would have had to redeem the bonds to pass 

the money to Anne. See Appellants’ Brief at 7. This argument is waived as 
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account for any of the other different scenarios in which Anne may have 

ultimately chosen to redeem the bonds. During his testimony, Murphy 

acknowledged that rather than immediately redeeming the bonds, Anne 

could have chosen to redeem the bonds incrementally. See N.T., 6/20/12, 

at 246. For example, Murphy conceded that Anne could have liquidated 

$50,000 in 2003, $50,000 in 2004, and $50,000 in 2005, etc., or in any 

other increments over the course of the rest of her life. See id. at 246-48. 

Additionally, Murphy admitted that the tax consequences of incrementally 

redeeming the bonds would have been entirely different from the $78,562 

figure he adduced in response to the trial court’s hypothetical and that he 

could not determine what those amounts would be without more 

information. Id. at 246-47. 

Moreover, there is no evidence of Anne’s income for 2003 and 2004 

and thus, there is no evidence as to what her tax bracket was for 2003 and 

2004. Id. at 249. Based on our review of the record, Murphy based his 

conclusion on the assumption that Anne, like Sylvester, had little to no 

income in 2003. See id. Consequently, there is no record support for the 

$78,562 figure Murphy came up with in response to the trial court’s 

hypothetical. 

 

Appellants did to raise the argument before the trial court. See Pa.R.A.P. 

302(a) (“Issues not raised in the lower court are waived and cannot be 

raised for the first time on appeal.”)
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Murphy’s testimony with regard to what was, in his opinion, the most 

tax efficient way to immediately redeem Sylvester’s bonds was speculative 

and did not account for the many ways in which Sylvester or Anne could 

have redeemed the bonds had Ruth not improperly done so. Thus, we can 

find no error in the trial court’s decision not to rely on Murphy’s conclusion 

on this issue. Therefore, Appellants are not entitled to relief for their first 

issue. 

For their second issue on appeal, Appellants argue that the trial court 

erred in ordering Appellants to reimburse Sylvester’s estate for the total tax 

liability Sylvester incurred resulting from Ruth’s improper liquidation of 

Sylvester’s bonds when Anne was able to recover all of the approximately 

$450,000 that Ruth liquidated. Appellants’ Brief at 13. Appellants assert 

that requiring them to pay all of the income tax when Anne recovered all of 

the money was “manifestly unreasonably and has no basis in the law.” Id. 

Appellants complain that the trial court’s decision gave Anne a windfall 

because she did not have to pay any tax on the redeemed bond money. Id.

The trial court found that Ruth had converted Sylvester’s bonds and 

consequently, ordered Appellants to reimburse the $89,691 tax loss that 

Sylvester incurred due to Ruth converted the bonds. See Nonjury Decision, 

9/6/13, at 23-24. Regarding the tort of conversion, this Court has stated 

the following: “The classic definition of conversion under Pennsylvania law is 

‘the deprivation of another’s right of property in, or use or possession of, a 
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chattel, or other interference therewith, without the owner’s consent and 

without lawful justification.’” HRANEC Sheet Metal, Inc. v. Metalico 

Pittsburgh, Inc., 107 A.3d 114, 119 (Pa. Super. 2014) (quoting 

McKeeman v. Corestates Bank, N.A., 751 A.2d 655, 659 n.3 (Pa. Super. 

2000)). Appellants’ do not contest the trial court’s determination that Ruth 

converted Sylvester’s bond’s and therefore, we find no error with the trial 

court’s decision to order Appellants to pay the damages Sylvester incurred 

from the conversion, i.e., the $89,691 tax liability.

Additionally, Appellants’ argument that the trial court’s decision 

allowed Anne to take the bond money tax-free is unavailing. There is no 

support in the record for Appellants’ argument that Anne received the 

approximately $450,000 worth of Sylvester’s redeemed bond money taxfree. Anne did admit to recovering the liquidated bond money and putting it 

in an account in her name around October 2003. See N.T., 6/19/12, at 97; 

Defendant’s Exhibit 17. The record indicates, however, that Anne wrote a 

check for $80,000 towards paying the $89,691 tax liability stemming from 

Ruth’s liquidation of Sylvester’s bond funds. Plaintiff’s Exhibit 7.4 Therefore,

Appellants’ argument that Anne received Sylvester’s redeemed bond money 

tax-free is not supported by the record. 

 

4

 Sylvester’s estate filed an extension for his 2003 tax return and along with 

the filing was a check, written by Anne, for $80,000, which was the amount 

estimated at that time for Sylvester’s 2003 tax liability. See Plaintiff’s 

Exhibit 7. The record does not contain any evidence of how the remaining 

$9,691 worth of tax liability was paid.
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Based on our conclusion that the trial court did not err in ordering Ruth 

to reimburse Sylvester’s $89,691 tax liability because Ruth caused the tax 

liability by converting Sylvester’s bonds, we do not need to address 

Appellants third and fourth issues on appeal, which argue that the trial court 

erred in applying the increased risk of harm standard and doctrine of 

unclean hands to support ordering Appellants to pay the tax liability. As the 

trial court did not err by requiring Appellants to pay the $89,691 tax liability 

incurred when Ruth improperly redeemed Sylvester’s bonds, we have no 

basis on which to afford Appellants any relief. 

Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 6/10/2015